Global manufacturing showed little risk of a double-dip recession as output in July grew in the United States and Europe and a rare contraction in China suggested Beijing was successfully reining in its hot economy. Global stock markets welcomed Monday's news that the US manufacturing sector grew last month for a 12th straight month and at a rate slightly better than expected.
-- Eurozone factory PMI up at 56.7 in July vs 55.6 in June
-- HSBC's China PMI below 50; official PMI still above
-- India, Russia manufacturing industries pick up
The Institute of Supply Management's index of factory activity fell to 55.5 in July from 56.2 in June but topped an updated median forecast of 74 economists surveyed by Reuters for a reading of 54.2. However, the growth rate was its lowest so far in 2010 and the new orders index slumped five points in July to 53.5, down almost 12 points from May's 65. That could indicate weaker manufacturing in the second half of the year.
"This suggests a gradual cooling in growth is more likely than a steep retrenchment," said Zach Pandl, US economist with Nomura Securities in New York. Credit Suisse said the 55.5 headline index was consistent with 3.75 percent economic growth, while RBS analysts said it indicated 4.5 percent real GDP growth. In Europe, production continued to grow after concerns about public debt levels and the health of the region's banks in recent months.
The eurozone's manufacturing purchasing managers index rose further above the 50 mark that separates growth from contraction, to 56.7 in July from 55.6 in June, led by Germany and Italy. But French manufacturing growth slowed to its weakest in 10 months, illustrating how uneven the rebound is even within Europe.
Meanwhile, production fell in China as the government successfully pulled back on the growth throttle. HSBC's PMI of Chinese companies showed government steps to slow bank lending and fight property speculation hit home as the headline index dipped below the 50 mark for the first time since the depths of the global downturn.
"While manufacturing may be slowing, we haven't gone off a cliff," said Nigel Gault, chief US economist with IHS Global Insight, in Lexington, Massachusetts. "The question is, are we going to stabilise or fall into a double dip? In that context, these numbers are encouraging."
The US survey indicated growth in jobs, with the employment index up to 58.6 in July after falling to 57.8 in June. Government payrolls figures for July are due on Friday. Many investors are still waiting on an improvement in the employment situation as a signal of a stronger recovery.
US economic growth slipped to an annual rate of 2.4 percent in the second quarter from 3.7 percent in the first, official figures showed on Friday. That heightened market concerns about continued US expansion and left investors betting on China and the rest of Asia to pick up the slack. Manufacturing surveys from two other big emerging economies served to bolster investor sentiment, with India marking its 16th month of expansion and Russia's activity improving for the seventh month in a row.
Business and consumer sentiment surveys in Europe have been largely positive over the past month, a trend underpinned on Monday by forecast-beating earnings from two of the continent's heavyweight banks, HSBC and BNP Paribas. European stock markets rose to a three-month high. Two weeks ago, European Central Bank President Jean-Claude Trichet urged industrial countries to cut public spending immediately to consolidate the fiscal recovery.