Factory output subdued going into 2012

Mon Jan 2, 2012 7:22am EST
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By Andy Bruce and Tony Munroe

LONDON/MUMBAI (Reuters) - Global manufacturing activity was subdued going into 2012, with the euro zone's industrial sector suffering its fifth straight month of declines in December and Asian factories mostly stuck in a rut.

Monday's purchasing managers indexes (PMIs) provided further evidence that Europe is unlikely to avoid a recession.

The rate of decline of activity in euro zone factories eased slightly to raise hopes the downturn will not be as severe as feared, though hiccups in the Spanish and Czech deficit reduction programs emphasized the extent of the continent's debt troubles.

With Asian PMIs showing a clear lack of momentum in the vast industrial economies of China and South Korea, the United States seems to be one of the few major economies showing signs of an upturn, even if modest and uncertain.

Economists expect the U.S. ISM manufacturing survey due at 1500 GMT on Tuesday to show American factories expanded at a faster pace in December.

The Eurozone Manufacturing Purchasing Managers' Index (PMI) rose slightly in December to 46.9 from November's 28-month low of 46.4, but marked a fifth month below the 50 mark that divides growth from contraction.

Compiler Markit said levels of production and new orders fell in all of the euro zone countries covered by the survey for the second month running.

"These numbers are consistent with our view that it's going to be a normal recession," said Dirk Schumacher, senior European economist at Goldman Sachs in Frankfurt.   Continued...