(Adds U.S. data, NEW YORK dateline)
* U.S. factory activity expansion speeds up
* Business activity growth slows in China and Europe
By Jonathan Cable, Xiaoyi Shao and Ryan Vlastelica
LONDON/BEIJING/NEW YORK, Aug 21 Business growth
in China and across Europe slowed this month, surveys showed on
Thursday, but U.S. activity picked up speed, leaving a mixed
picture of global economic growth.
"If you take all these things together we are clearly
looking at a global economy that doesn't have a huge amount of
momentum behind it," said economist Peter Dixon at Commerzbank.
China's manufacturing sector expanded at its slowest pace in
three months in August and a Reuters poll showed Japan's
economic recovery is likely to be modest despite a small
acceleration in the factory sector.
Markit/HSBC's preliminary China manufacturing purchasing
managers index fell to 50.3 in August from July's 18-month high
of 51.7, badly missing a Reuters forecast of 51.5 but just above
the 50 threshold that differentiates expansion from contraction.
"The sharp drop in the PMI is perhaps not surprising given
last month's disappointing activity and lending data. That said,
we are not expecting a rapid deterioration in economic
momentum," Julian Evans-Pritchard, China economist at Capital
Economics, wrote in a note.
"Meanwhile, we expect the government to continue to fine
tune policy as necessary to prevent growth from slipping too
much over the coming quarters."
A burst of policy stimulus since April lifted China's annual
economic growth to 7.5 percent in the second quarter, from 7.4
percent in the first quarter, the weakest pace in 18 months.
In Japan, the PMI for factory activity showed acceleration
in August as export and domestic demand increased, another sign
economic growth is steadying after shrinking in the second
quarter due to a sales tax increase.
But the Reuters Tankan survey indicated the recovery is
likely to be modest, which could keep pressure on the central
bank to act to sustain growth in the world's third-largest
EUROPEAN ACTIVITY SLUGGISH
Euro zone private business activity expanded more slowly
than expected in August, even before the full effects of
sanctions imposed on and by Russia over Ukraine are felt.
Markit's Composite Purchasing Managers' Index for the euro
zone will provide gloomy reading for the European Central Bank
as it showed the big two economies of Germany and France
The Composite Flash PMI fell to 52.8 from July's 53.8, far
short of expectations in a Reuters poll for a modest dip to
However, Markit said the data points to third-quarter
economic growth of 0.3 percent, matching predictions from a
Reuters poll last week.
But there are challenges facing the European economy after
Europe and the United States imposed economic sanctions on
Moscow over the Kremlin's support for rebels in eastern Ukraine,
prompting a tit-for-tat response from Russian President Vladimir
"It is clearly premature to start fretting about a new
downturn," said Martin van Vliet at ING. "That said, with
geopolitical tensions increasingly posing a threat to the
subdued and fragile upturn, it is clearly premature to assume
that the ECB's easing work is fully done."
Companies in Europe are beginning to show signs of strain.
Germany's Adidas, the world's No. 2 sportswear
firm, cut its profit target due to the rouble's fall and
increasing risks to Russian consumer sentiment. Brewer Heineken
said its sales volume in Russia fell by a "low-double
The composite PMI in Germany fell to 54.9 from 55.7. Even
so, Germany's private sector grew for a 16th straight month in
August, suggesting Europe's largest economy could expand
robustly in the third quarter after it suffered a surprise
contraction in the second.
For France, the euro zone's second-largest economy, the
Composite PMI rose from 49.4 to the break-even mark at 50,
meaning it is neither expanding nor contracting.
In Britain, consumers have been the main driver of the
country's economic recovery that began last year, but retail
sales rose in July at a weaker pace than expected.
No action is expected from the ECB in the coming months as
it waits to see what effect another round of temporary access to
cheap cash for banks has on inflation and economic growth.
Consumer prices in the euro zone rose just 0.4 percent on
the year in July, the smallest annual rise since October 2009 at
the height of the financial crisis, and well within the ECB's
"danger zone" below 1.0 percent.
U.S. FACTORY EXPANSION FASTER
The U.S. manufacturing sector expanded in August, with the
rate of growth exceeding expectations and moving at the fastest
pace in more than four years, equivalent data from private data
vendor Markit showed on Thursday.
Markit said its preliminary or "flash" U.S. Manufacturing
Purchasing Managers Index rose to 58 in August, its highest
since April 2010, from 55.8 in July. Economists polled by
Reuters expected a reading of 55.7.
"August's survey delivers further evidence that robust
manufacturing growth momentum has been sustained through the
third quarter, with overall business conditions improving at the
fastest pace for over four years," said Tim Moore, senior
economist at Markit.
Markit's gauge of employment in the U.S. manufacturing
sector rose to 54.6 from 51.2, and was at its highest since a
matching 54.6 in March 2013.
In a different survey, factory activity in the U.S.
mid-Atlantic region expanded in August to its highest level
since March 2011, according to the Philadelphia Federal Reserve
Its business activity index rose to 28.0 from 23.9 the
previous month. That topped economists' expectations for a
reading of 19.2, according to a Reuters poll. Any reading above
zero indicates expansion in the region's manufacturing. The
survey covers factories in eastern Pennsylvania, southern New
Jersey and Delaware.
It is seen as one of the first monthly indicators of the
health of U.S. manufacturing leading up to the national report
by the Institute for Supply Management.
"Overall, while the headline was strong, the sub-indexes
were softer, and therefore the market's response has been
somewhat muted," said Ian Lyngen, senior government bond analyst
at CRT Capital in Stamford, Connecticut.
(Editing by Jeremy Gaunt, Clive McKeef and Dan Grebler)