London/Beijing, Oct.1: Chinese manufacturing picked up steam in September after a mid-year lull, easing worries of a marked downturn in global growth, although business surveys again showed a cooling recovery in European factories.
Global stock markets perked up on Friday after two separate purchasing managers’ indexes (PMIs) showed Chinese factories expanded robustly, shrugging off European numbers that revealed Spain and Ireland faring badly.
The Markit Euro Zone Manufacturing PMI suggested a two-speed recovery taking hold in Europe, with the headline index dropping to 53.7 in September from 55.1 in August, still well above the 50 mark that divides growth from contraction.
“Growth is becoming more focussed on the two largest economies of Germany and France as fiscal consolidation measures begin to bite in the periphery,” said Andrew Grantham at HSBC.
Factories in austerity-ridden Ireland and Spain went into reverse gear. Ireland on Thursday revealed an enormous bill for its banking sector bailout, and Spain lost its last top-notch “AAA” credit rating amid 20 per cent unemployment.
Manufacturing growth in Britain, meanwhile, fell to its lowest since November as exports declined for the first time since July 2009, with the PMI there unexpectedly falling to 53.4 from 53.7.
Although the PMI surveys, which are considered a good leading indicator of broader economic activity, also showed declines in South Korea and Australia, the strength of the upturn in China cheered analysts and markets.
China’s official PMI rose to 53.8 in September from 51.7 in August, well above a median forecast of 52. A separate Chinese manufacturing PMI from HSBC also showed a strong upturn in September, rising to 52.9 from 51.9 in August.
“Fears of a substantial downturn have proved unfounded and this should put to rest a lot of the worries about the global outlook,” said Mr Rob Henderson, head market economist at National Australia Bank in Sydney.
The data pushed LME copper to a two-year high, lifted the Australian dollar and gave Asian stocks a boost.
Despite Thursday’s news that Japanese manufacturing contracted for the first time in 15 months, Asian manufacturers have
largely followed signs that US activity had picked up a little in the third quarter.
India’s manufacturing sector expanded for the 18th straight month, but the pace slowed to a 10-month low.
“Capacity constraints may be partly responsible for this, in addition to the fading fiscal stimulus,” said Mr Frederic Neumann, co-head of Asian Economics Research at HSBC.
In Australia, among the few developed economies to avoid a recession after the global financial crisis, a strong local currency and soft domestic demand led to the first contraction in manufacturing activity in 2010.
The ISM index, measuring US manufacturing activity and due to be released later on Friday, is expected to ease to 54.5 in September from 56.3 in August, underscoring the tepid nature of the U.S, recovery.
On Thursday, the US government nudged its second-quarter growth estimate up to a 1.7 per cent annualised pace from 1.6 per cent after growth in consumer spending for April to June was revised up to the fastest pace in three years.