* Euro zone factories see first growth in 2 years
* British manufacturing surges in July
* U.S. factory output soars to two-year high
* Chinese PMIs show stabilizing factory sector
By Steven C. Johnson and Andy Bruce
NEW YORK/LONDON, Aug 1 U.S. manufacturing grew
in July at its fastest pace in two years while European
factories snapped a two-year run of declining output, suggesting
a prolonged euro zone recession may be near its end.
Output at British factories also surged last month,
according to business surveys released on Thursday, while an
index of China's massive manufacturing sector suggested the
slowdown in the world's No. 2 economy may be stabilizing.
The data should hearten policymakers around the world,
particularly those at the European Central Bank who have come
under pressure to support an economy struggling to escape from
the longest recession in the 17-country euro zone's history.
It probably does not, however, point to an imminent
tightening of monetary policy. ECB President Mario Draghi on
Thursday stressed that interest rates would remain at current
lows or lower for an "extended time."
On Wednesday, the U.S. Federal Reserve said that the world's
biggest economy was recovering but still needed support, dashing
some expectations that it would start winding down its own
stimulus program as soon as September.
"The general tilt of the Fed and other global central banks
is still very accommodative, so I'm not concerned that this data
will change that," said Thomas Simons, money market economist at
Jefferies & Co in New York, who said the Fed will probably wait
until the fourth quarter to slow its monthly bond purchases.
A sharp rise in new orders helped propel the Institute for
Supply Management's index of national factory activity to a
two-year high of 55.4 in July, beating economists' expectations
of 52.0 and June's reading of 50.9.
A separate index from financial data firm Markit rose to
53.7, a four-month high, from 51.9 in June.
"It's obviously good news. Orders have bounced back. If this
is happening in the context of a global improvement, that's a
good thing," said Pierre Ellis, senior global economist at
Decision Economics Inc in New York.
Markit's Eurozone manufacturing PMI showed marginal growth
among factories for the first time in two years, with the index
at 50.3, up from 48.8 in June. Output rose in Germany, Italy,
the Netherlands, Ireland, France and Austria.
The company's flash composite PMI, based on surveys of
thousands of companies across the region, jumped to an 18-month
high of 50.4, from 48.7. Readings above 50 signify growth.
Markit chief economist Chris Williamson said it suggested
the euro zone would grow by 0.1 percent in the current quarter,
in line with a Reuters poll taken earlier this month.
In China, the official factory PMI was a bit stronger than
expected last month, although growth remained modest. A rival
report from HSBC painted a darker picture, showing factory
activity at its lowest level in nearly a year.
PMI reports showed output and new orders falling in July in
India, South Korea and Taiwan. In Indonesia, output and new
orders were holding at similar levels to June.
Overall, the data allayed fears that the global economy's
mid-year lull would deepen, although much still hinges on how
many jobs the U.S. economy added in July. That data is due
Friday, and economists polled by Reuters expect a 184,000 gain
in payrolls compared to 195,000 in June.
"We're seeing different trends in different parts of the
world, which are to a large extent offsetting each other," said
Andrew Kenningham, senior global economist at Capital Economics
The biggest surprise came form the UK, where Markit's UK
manufacturing PMI jumped to 54.6, trumping even the most
optimistic forecast in a Reuters poll of economists and
triggering a rise in sterling.
Brian Hilliard, economist at Societe Generale, noted the
fastest rises in new orders and output since February 2011.
"Just amazing. What's the need for (Mark) Carney to do
anything?" he said, referring to the new Bank of England
Governor. "It's shaping up for Q3 to be stronger than Q2."