* Flash euro zone PMIs post unexpected declines in March
* Most survey responses came before Cyprus bailout deal news
* U.S. manufacturing growth, hiring quickens
* Chinese manufacturers ramp up production
By Jonathan Cable and Steven C. Johnson
LONDON/NEW YORK, March 21 Economic malaise in
the euro zone deepened in March even before Cyprus ran into debt
trouble, but manufacturing in the United States and China
improved, surveys showed on Thursday.
Solid growth in the United States and China, the world's
largest economies, will be important for overall global growth,
particularly as the 17-country euro zone continues to struggle.
Markit's Flash Eurozone Composite Purchasing Managers'
Index, seen as a reliable economic growth indicator for the
bloc, fell more than expected, to 46.5 in March from 47.9 in
February. The index has now been below the 50 mark that
separates growth from contraction for all but one of the past 19
Most responses to the survey were received before Cyprus's
parliament rejected a bailout that included an unprecedented
levy on all bank deposits, leaving the country perilously close
to financial collapse.
"The sharp decline in the flash composite PMI in March pours
cold water on hopes of an imminent end to the euro zone
recession," said Martin van Vliet, economist at ING. "If the
situation surrounding Cyprus spirals out of control, the onset
of recovery might well be delayed."
French businesses had their worst month in four years,
likely pushing the euro zone's second-biggest economy into
recession. Germany, the bloc's biggest economy, also showed
signs of fatigue.
Things were a bit sunnier in the United States and Asia.
Markit's Flash U.S. Manufacturing Purchasing Managers Index
rose to 54.9 this month from 54.3, and the pace of hiring in the
"With manufacturing a reliable bellwether of the rest of the
economy, gross domestic product will have risen at a much
improved rate" over the first three months of 2013, Chris
Williamson, chief economist at Markit, said.
The U.S. economy grew at a 0.1 percent rate in the fourth
quarter of 2012, but economists are forecasting a first-quarter
growth rate of about 2 percent.
A separate report from the Philadelphia Federal Reserve Bank
showed factory activity in the mid-Atlantic region grew in
March. The survey is seen as one of the first monthly indicators
of the health of the U.S. manufacturing sector.
Another hopeful sign for the United States: sales of
existing homes hit a three-year high in February and prices
rose. The data suggests a recent acceleration in the housing
market recovery continued.
The four-week average of Americans filing for first-time
jobless benefits fell to its lowest level in five years. The
data "continue to point toward improvement in U.S. labor
markets," said Citigroup economist Steven Wieting.
In China, factories increased their output after a holiday
dip, suggesting solid, if not spectacular, first-quarter growth
for the world's No. 2 economy.
The HSBC China PMI for March rose to 51.7 from 50.4, but
remained below a two-year high reached at the start of the year.
The pullback in February had raised concerns in financial
markets that China's recovery was losing steam. Government data
earlier in March suggested the economy had started 2013 with
only tepid growth after a burst in the fourth quarter.
The HSBC report allayed some of those fears.
"Current readings ... seem to us to be consistent with
(gross domestic product) growth close to 8 percent
year-on-year," wrote Dariusz Kowalczyk of Credit Agricole-CIB in
WORSE TO COME?
In Europe there were few signs of a brightening outlook.
Markit said conditions in Europe could worsen by the end of the
"Events that hit business confidence can have a very rapid
effect on the data, and so there is good reason to believe that
responses we collect this week will on average be more
negative," Williamson said, referring to the Cyprus confusion.
The latest PMI data, which already showed a contraction
since the second quarter of last year, suggested the euro zone
economy would shrink 0.3 percent in the current quarter, Markit
That outlook is worse than the 0.1 percent contraction
predicted in a Reuters poll last week that also forecast
negligible growth next quarter.
Germany's composite PMI fell in March, although it held
above 50 for a fourth month, suggesting some strength in
Europe's largest economy.
Some of the factory activity in the euro zone was generated
by running down order books while incoming new business for
services firms dropped at the fastest pace since October,
suggesting next month's PMI will also be weak.