US manufacturing growth up; Europe, Asia slip

Reuters  - Growth in U.S. manufacturing posted a surprise gain in June, contrasting with Europe and Asia where manufacturing activity lost steam for a second month as interest rate hikes there began to bite.

The U.S. data may vindicate Federal Reserve officials who have pointed to temporary factors as a reason for the slowdown in the global economic recovery in the first half of the year.

But economists cautioned it was too soon to say the U.S. recovery had shaken off its first half malaise.

Economists have blamed a combination of supply disruptions due to the devastating earthquake in Japan, oil price rises, and Europe's sovereign debt crisis for the stuttering economic recovery.

The Institute for Supply Management data "sets the groundwork for acceleration in growth for the second half of the year," said Michael Gapen, director of U.S. economic research at Barclays Capital in New York.

The ISM said its index of national factory activity rose to 55.3 from 53.5 the month before. The reading topped expectations for a fall to 51.8, according to a Reuters poll of economists.

MANUFACTURING GROWTH SLOWS IN EUROPE, ASIA

Purchasing managers' indexes in Asia and Europe, though, slid to multi-month lows in June as factories fought a twin battle with weaker consumer demand overseas and tightening monetary policy at home.

In Asia, central banks have been raising interest rates aggressively, hampering economic growth in the process. The European Central Bank is expected to raise rates again next week after hiking in April.

The Markit Eurozone Manufacturing Purchasing Managers' Index fell to 52.0 in June from 54.6 in May, its lowest reading since December 2009, in line with an earlier flash estimate.

More worryingly for European policymakers, the data again highlighted a two-speed economy, with a more resilient Germany and France propping up the bloc's weaker constituent parts, though even these powerhouses showed a considerable slowing in growth.

In China, the official PMI fell to a 28-month low of 50.9, indicating production grew only marginally from the previous month, leading some analysts to predict Beijing may be less aggressive in tightening monetary conditions later this year.

Indian manufacturers also seemed to be under pressure, with the HSBC Markit PMI dropping more than two percentage points to a nine-month trough of 55.3, the steepest monthly fall since November 2008, when global trade collapsed following the bankruptcy of investment bank Lehman Brothers.

While months of policy-tightening no doubt contributed to slower growth in both China and India, they are also feeling the pinch from cautious shoppers in key export markets in the United States and Europe.

The official sub-index for new export orders in the China PMI fell to 50.5 in June as backlogs for new orders shrank for a second straight month.

In Europe, new orders for manufactured goods across the 17-nation bloc that shares the euro, fell for the first time in nearly two years, while the new export order index echoed the previous month's rapid fall.