Europe booms while Asia has a rest

Global econ­omy im­proves

The Star Early Edition - - BUSINESS REPORT - Jonathan Ca­ble and Ra­jesh Ku­mar Singh

FACTORIES across much of Asia ran into a soft patch in May as ex­port de­mand slowed, but those in Europe en­joyed buoy­ant growth amid signs of steady im­prove­ment in the global econ­omy.

An­a­lysts said the weak­ness in Asia was likely to be tem­po­rary and the find­ings from pri­vate busi­ness sur­veys came a day af­ter Moody’s In­vestors Ser­vice painted an up­beat pic­ture of global growth.

Fur­ther in­di­ca­tions the euro zone’s econ­omy is en­joy­ing a sta­ble and broad-based re­cov­ery, along­side in­fla­tion­ary pres­sures, will be wel­comed by pol­i­cy­mak­ers at the Euro­pean Cen­tral Bank (ECB).

And giv­ing a boost to Prime Min­is­ter Theresa May a week be­fore a na­tional elec­tion, Bri­tish man­u­fac­tur­ing chalked up its sec­ond-fastest growth in nearly three years last month, putting the sec­tor on track to shrug off Brexit-re­lated un­cer­tainty and im­prove on a weak first-quar­ter per­for­mance.

IHS Markit’s Man­u­fac­tur­ing Pur­chas­ing Man­agers’ In­dex for the euro zone rose to 57 points in May, up from April’s 56.7 points and its high­est level since April 2011. A read­ing above 50 points in­di­cates growth.

Ger­many, Europe’s largest econ­omy, led the charge, but IHS Markit said solid up­turns were recorded in other coun­tries as well. France lagged be­hind, but is still en­joy­ing its best quar­ter for six years.

As the bloc’s eco­nomic per­for­mance im­proves, the ECB will sound a lit­tle more op­ti­mistic at its June 8 meet­ing, pos­si­bly rais­ing its risks as­sess­ment to bal­anced or dis­cussing re­mov­ing its bias to ease pol­icy, a poll of econ­o­mists showed.

Across the Chan­nel, Bri­tain’s fac­tory PMI slipped to 56.7 points from a three-year high in April. But aside from the pre­vi­ous month’s PMI, that was its strong­est read­ing since June 2014. “Over­all, af­ter the sharp slow­down in GDP growth in Q1, to­day’s sur­vey sug­gests that the man­u­fac­tur­ing sec­tor will play its part in an ac­cel­er­a­tion in growth in Q2,” said Scott Bow­man at Cap­i­tal Eco­nom­ics.

In a week’s time Bri­tons vote in an early na­tional elec­tion called by May to try to bol­ster her stand­ing be­fore talks to leave the EU.

At the start of the cam­paign in April, May seemed on track to win an in­creased ma­jor­ity. But polls over the past week show the op­po­si­tion Labour Party has eaten into her lead.

May has high­lighted the record num­ber of peo­ple in work in her cam­paign, and yes­ter­day’s fig­ures showed man­u­fac­tur­ers planned to hire staff at the fastest pace in nearly three years.

A sim­i­lar busi­ness sur­vey to be re­leased in North Amer­ica later in the day was ex­pected to show solid growth. Ear­lier read­ings added to signs that Asian economies gen­er­ally re­mained buoy­ant in the sec­ond quar­ter, with man­u­fac­tur­ing ac­tiv­ity con­tin­u­ing to im­prove – al­beit at a more modest pace – and busi­ness con­fi­dence re­main­ing strong over­all.

Still, there were mixed read­ings on re­gional pow­er­house China, with of­fi­cial data show­ing steady growth fu­elled by a con­struc­tion boom, but a pri­vate sur­vey point­ing to the first con­trac­tion in ac­tiv­ity in 11 months.

Af­ter bat­tling a multi-year trade re­ces­sion, Asian ex­ports have seen a strong re­bound this year, of­ten led by elec­tron­ics. The tail­winds from Chi­nese com­modi­ties and tech prod­ucts de­mand, how­ever, ap­pear to be fad­ing – Reuters

A labourer works on screw pro­cess­ing at a ma­chin­ery man­u­fac­ture com­pany in Zhoushan, Zhe­jiang prov­ince, China. But tech prod­ucts de­mand in the coun­try ap­pears to be fad­ing.

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