July 1, 2015 / 12:15 PM / 2 years ago

Asian factory growth stays weak, Europe and U.S. sluggish

(Reuters) - Global manufacturing growth slowed last month with most Asian economies remaining weak, while Greece’s woes kept euro zone factories in check and U.S. manufacturing turned in a mixed performance, business surveys showed on Wednesday.

An employee works at the production line of an automobile factory in Dalian, Liaoning province, October 18, 2014. REUTERS/Stringer/Files

JPMorgan’s Global Manufacturing Purchasing Managers’ Index, produced with private data vendor Markit, slipped to 51.0 in June from 51.3 in May, matching April’s near two-year low.

However, June was the 31st month the index has been above the 50 level that separates growth from contraction.

“The growth of manufacturing output remained subdued during the second quarter, with the rates of increase in new business and output slipping to their lowest since the first half of 2013,” said David Hensley, a director at JPMorgan.

The global PMI index combines data from countries including the United States, Japan, Germany, France, Britain, China and Russia.

ASIA FACTORY ACTIVITY STILL WEAK

China’s factory activity contracted for the fourth straight month in June but at a slower pace than in May, signaling the slowdown in the world’s second-largest economy may be leveling out.

The HSBC/Markit Flash China Manufacturing PMI edged up to 49.4 from 49.2 in May, remaining in contraction territory.

“The final reading of the HSBC China Manufacturing PMI pointed to a further decline in the health of the manufacturing sector,” said Annabel Fiddes, economist at Markit.

“On the upside, there were some signs of improvement in total new orders and new export business, suggesting demand both at home and abroad is reviving. However, it is likely that more stimulus measures will be required to ensure that the sector can regain growth momentum and to encourage job creation.”

China’s central bank lowered lending rates last weekend for the fourth time since November and trimmed bank reserve requirements, stepping up efforts to support an economy headed for its poorest performance in a quarter century.

China’s official government PMI stood at 50.2 in June, unchanged from May’s reading.

Japanese manufacturing activity barely expanded in June despite a strong pick-up in export demand.

The Nikkei/Markit final Japan Manufacturing PMI was 50.1 in June, down from 50.9 in May, adding to fears of a sharp slowdown in economic activity in the second quarter.

EUROPEAN EXPANSION SLUGGISH

Speculation that Greece would default on its debts and possibly leave the euro zone kept Europe’s manufacturing output revival in check in June.

Markit’s final euro zone manufacturing PMI reached a 14-month high but only nudged up to 52.5 from May’s 52.2.

Germany’s manufacturing sector expanded with Markit’s PMI rising to 51.9 from 51.1 in May, while France’s PMI rose for the first time since April 2014.

However, Greece’s Markit PMI fell to 46.9 from 48.0, signaling the 10th straight month of contraction.

The expansion of euro zone manufacturing “is still only consistent with fairly sluggish growth in euro zone industrial output, suggesting the beneficial effects of the euro’s depreciation may already be starting to fade,” said Jessica Hinds, European economist at Capital Economics.

“The country breakdown revealed that industry is still faring well in Spain and Italy, but with worries about Greece intensifying this may not be sustained.”

British manufacturing growth slowed unexpectedly to its weakest in more than two years, dented by subdued European export demand.

U.S. MANUFACTURING GROWTH MIXED

Growth in the U.S. manufacturing sector eased in June, hitting its slowest since October 2013, according to Markit data, but accelerated according to an alternative reading from the Institute of Supply Management

Markit’s reading declined to 53.6 in June, its lowest since October 2013, from 54.0 in May.

“Purchasing managers are reporting the slowest rate of manufacturing expansion for over a year and a half, suggesting that the economy is slowing again,” said Chris Williamson, chief economist at Markit.

“The slowdown is largely linked to a third consecutive monthly fall in exports, in turn attributed by many companies to the strong dollar undermining international competitiveness.”

However, ISM said its index of U.S. factory activity rose to 53.5, the highest since January, from 52.8 in May.

Elsewhere in the Americas, Brazil’s manufacturing activity contracted for a fifth straight month although at a slightly slower pace than in May, according to an HSBC/Markit survey.

The Brazil PMI rose to a seasonally adjusted 46.5 in June from 45.9.

Brazilian manufacturers have long struggled with high inflation, falling consumer confidence and rising interest rates. Industrial output is on track to drop 4.0 percent this year compared with 2014, according to a central bank poll, dragging economic growth down to its worst level in a quarter century.

“Recent months have seen production drop at the fastest pace since the financial crisis, resulting in sharp cutbacks in employee headcounts as manufacturers struggled to secure new contracts,” Markit economist Pollyanna De Lima said.

“It seems that the end of the downturn is not yet in sight.”

Mexico’s manufacturing sector sentiment slipped in June to its lowest in 11 months as the pace of output and new orders flagged.

The HSBC Mexico PMI dipped to 52.0, its lowest since July 2014, down from 53.3 in May.

Additional reporting by Ian Chua, Kevin Yao, Leika Kihara, Tetsushi Kajimoto and Caroline Valetkevitch; Editing by Clive McKeef and Meredith Mazzilli

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