U.S. factories rebound, China struggles, Europe shows promise

Mon Jul 1, 2013 10:37am EDT
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By Steven C. Johnson and Jonathan Cable

NEW YORK/LONDON (Reuters) - U.S. manufacturing staged a modest rebound in June even as hiring declined sharply but activity among China's large goods producers slowed to multi-month lows as global demand weakened.

Worries about the strength of the factory sector in the world's two biggest economies took some of the shine off survey results showing that Europe's prolonged economic slump may have at least stabilized and possibly reversed in some areas.

"Global manufacturing is showing signs of renewed weakness. With not very strong momentum in China, we wonder if this trend in the euro zone can continue," said BNP Paribas strategist Evelyn Herrmann.

Markit's final Eurozone Purchasing Managers' Index rose to a 16-month high of 48.8 in June, and some debt-strapped countries such as Spain appeared on the verge of growth.

But a cheerless outlook for China - an official survey showed factory growth stalling while a private one showed it at a nine-month low - remains a concern as demand dries up from customers at home and abroad.

"The Chinese economy is far from out of the woods. A few sub-indicators of the PMI have long indicated that the economy is in sharp distress," said Xianfang Ren, an economist at IHS.

The picture for the U.S. factory sector was also mixed. The Institute for Supply Management's closely watched index bounced back last month after indicating an unexpected contraction in the sector in May. But firms took on the fewest new workers since September 2009.

"It's nice to see manufacturing moving back into growth territory from contraction," said Joel Naroff, president of Naroff Economic Advisors in Holland, Pennsylvania.   Continued...

An employee welds a water turbine at a factory in Jinhua, Zhejiang province May 23, 2013. REUTERS/William Hong