Andy Bruce and Lucy Hornby London and Beijing

Chinese manufacturing returned to growth in November for the first time in over a year and the deep downturn in euro zone factories eased slightly, according to business surveys released yesterday.

The purchasing managers indices (PMIs) suggest that China, whose economy has misfired this year, is regaining its vigour going into 2013. If sustained, it could prove vital for the world economy next year, since a meaningful recovery in Europe still looks a long way off.

While the decline among the euro zone’s embattled factories eased to its best level in eight months in November, the latest PMIs showed the economy is on course for its worst quarter since the depths of early 2009.

Data due from the US later yesterday was expected to show manufacturing growth slowed slightly in November.

“They could be worse. We’re not in a situation where all the manufacturing PMIs are heading downwards,” Philip Shaw, the chief economist at Investec in London, said.

He said the Chinese PMIs were encouraging, although their significance, globally speaking, was unclear.

“They’re not a pointer necessarily that the rest of the global economy is recovering – we suspect there is an element of domestically driven growth coming through in the numbers there.“

Yesterday’s final reading of HSBC’s China manufacturing PMI rose to 50.5 in November from 49.5 in October, the first time since October 2011 the headline number has topped the 50-point growth threshold.

The big emerging economies that have contributed most to global growth in recent years have been sputtering, with India expected to post its weakest full-year gross domestic product (GDP) expansion in a decade and Brazil logging an unexpectedly weak third quarter.

That has left investors once again hoping China will take up the slack, after seven consecutive quarters of slowing growth.

“There is growing confidence that China’s economy bottomed in the July to September quarter, with signs of firmer external demand,” said Hirokazu Yuihama, a senior strategist at Daiwa Securities.

The euro hit a six-week high and shares rose after the release of the PMIs.

Markit’s euro zone manufacturing PMI rose to 46.2 in November from October’s 45.4, though it stayed well below the 50 mark dividing growth from contraction for the 16th consecutive month.

There was little sign of an imminent turnaround to growth, however, with the data merely showing factory activity, new orders and output declining at a slower rate.

“With official data lagging the PMI, the rate of GDP decline is likely to have gathered pace markedly on the surprisingly modest 0.1 percent decline seen in the third quarter,” said Chris Williamson, the chief economist from Markit.

But the PMI appeared to bottom out in July and slowly reviving export demand in markets like the US and China should further help arrest the fall in production and job cuts in euro zone factories, he said.

British manufacturing activity shrank less than expected in November, but the sector remained fragile as orders fell, a survey found yesterday.

In the US, the Institute of Supply Management index of national factory activity, one of two PMI surveys due yesterday, was expected to decline to 51.3 for November, still above the 50-line, from 51.7 in October.

The most pressing threat to the US economy remains a series of automatic budget cuts and tax hikes due at the end of the year that could plunge it back into recession, unless opposing politicians can come to a deal to avert it. By yesterday morning, neither side had been willing to yield. – Reuters