London / Beijing - European factories experienced robust growth in August and China bounced back on rising demand, lifting prospects for broad-based recovery on the back of the US revival.
India, at the epicentre of current emerging market turmoil, saw its manufacturing activity shrink. Lacklustre performances in France and in some other Asian manufacturers also highlighted the fragility of the rebound.
The US Institute of Supply Management is set to publish its bellwether purchasing managers’ index (PMI) for US factories today. A Reuters poll showed the index is expected to slip to 54 from July’s 55.4.
The data comes as markets are bracing for the US Federal Reserve to begin winding down its bond-buying programme – a signal the US central bank thinks the recovery is on track. That prospect, however, is causing concern in some emerging economies that have benefited from the US stimulus.
“The bag is getting more full with better numbers. The pick-up in the Chinese PMI is helpful… that’s the big one in terms of sentiment, with a bit of help from the European numbers,” Victoria Clarke at Investec said.
Factory activity in the euro zone rose at its fastest pace in over two years, while China’s manufacturing sector grew in August for the first time in four months, according to business surveys published yesterday.
Markit’s manufacturing PMI for the euro zone jumped to 51.4 from 50.3 in July – the first month the index had been above the 50 line that signifies expansion since February 2012. The reading pipped an earlier preliminary figure of 51.3.
But while those surveys showed the euro zone’s nascent recovery may be taking hold, activity in France declined for the 18th month.
“In the end France should be dragged by the rest of the euro area, but it certainly seems to be lagging,” Clarke said.
Highlighting the fragility of the recovery, the PMI showed European manufacturers reduced headcount for the 19th month in August and at a sharper rate than in July.
Outside the currency bloc the news was better – British manufacturing accelerated again in August and new orders and output rose at their fastest pace in almost 20 years, boosting hopes that the country’s recovery is broadening.
Chinese factories expanded for the first time in four months. Data on Friday showed Japanese manufacturers also posted stronger growth. A PMI survey showed activity grew in August for a sixth month.
The final Markit/HSBC China PMI climbed to 50.1 for August, and a similar official survey released on Sunday showed sector growth hit a 16-month high last month.
But relief that China may have dodged a sharp slowdown was moderated by investor apprehension that times remain tough, especially as other Asian factories foundered, especially in India. – Reuters