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  • Dec 24, 2014
  • Updated: 11:29pm
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ECONOMY

US manufacturing grows strongly in September as Europe and Asia falter

American manufacturing expanded last month, strongly beating analysts' forecasts, but the outlook remained bleak in Asia and Europe

PUBLISHED : Tuesday, 02 October, 2012, 12:00am
UPDATED : Tuesday, 02 October, 2012, 4:33am

The US manufacturing sector expanded last month, shaking off three months of weakness as new orders and employment picked up, an industry report showed yesterday.

The Institute for Supply Management's index of national factory activity rose to 51.5 from 49.6 in August, blowing away economists' expectations for 49.7, according to a Reuters poll. It was the first time since May the index has been above the 50 mark, which indicates expansion.

It was a rare bright spot on a day of global industrial gloom.

Manufacturing activity on the mainland continued to contract last month, echoed by weak signs of confidence in Japan and an ongoing decline in South Korean exports. In the euro zone, manufacturing contracted for the 14th consecutive month as demand slumped despite price reductions. The pace of growth in Canadian manufacturing fell for a third straight month, and in Australia, manufacturing shrank at a faster pace last month.

China's official purchasing managers' index (PMI), a gauge of nationwide factory activity, edged up to 49.8 last month from 49.2 in August - the first two-month contraction since 2009 - the National Bureau of Statistics and the China Federation of Logistics and Purchasing said yesterday. The latest figure was slightly below economists' median consensus forecast of 50.1 because small and medium-sized firms lost further ground amid slackening growth at home and weak external demand.

Mainland economic growth has moderated for six quarters in a row, and the new data puts extra pressure on the government to act to avoid a slowdown below its growth target of 7.5 per cent for the year.

Meanwhile, Japan's Tankan index for large manufacturers fell to minus 3 last month from minus 1 in June, suggesting that more firms consider operating conditions to be unfavourable. South Korea's exports fell 1.8 per cent from a year earlier, the third monthly contraction, owing to weak demand from Europe.

Economists have been expecting Asian central banks, including the People's Bank of China, to ease monetary policy to revitalise their economies.

"The chance of cuts in reserve requirement ratios could rise significantly if interbank rates do not reverse [downwards] after the week-long holiday," said Lu Ting, a China economist at Bank of America Merrill Lynch, who suggests Beijing will be forced to make efforts to counter the slowdown in growth and the deteriorating employment market.

While the Markit manufacturing PMI for the euro zone rose to 46.1 last month from 45.1 in August, a Bloomberg survey of analysts found they were lowering estimates for European earnings growth next year by 52 per cent.

Additional reporting by Reuters and Bloomberg

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