European outlook dims

Manufacturing strengthened in the United States and China in March while the eurozone contracted for the eighth straight month, underlining the uneven pace of global economic growth. The US Institute for Supply Management’s index of national factory activity rose to 53.4, topping economists’ expectations of 53.0. A reading above 50 indicates expansion. Factory activity also strengthened in leading Asian exporters China, South Korea and Taiwan, although output was still far from robust. However, other reports showed the downturn in Europe’s periphery members has spread to the core countries of Germany and France, according to purchasing managers’ indexes for March. The outlook is grim as new orders fell across the region for the tenth month. “We are probably through the weakest for the global backdrop in terms of the major economies already, but they are now coming out at different paces,” said Jeavon Lolay, head of global research at Lloyds Banking Group. “Asia is going to lead the global economy with the United States not too far behind, leading the developed economies, but Europe will be the laggard.” Still, the US data also showed a hint of weakness. The ISM said new orders edged down to 54.5 from 54.9 and prices paid also eased to 61.0 from 61.5. Markit’s Eurozone Manufacturing PMI dropped to 47.7 last month from 49.0 in February, in line with a preliminary reading. It has now been below the 50 mark, which divides growth from contraction, since August. Earlier data from Germany, Europe’s largest economy, showed its manufacturing sector contracted last month and it was a similar story in neighboring France. In Spain, struggling to implement austerity measures demanded by the European Union to meet tough deficit targets, the sector contracted for the 11th month. Manufacturing in Italy shrank for an eighth month. Across the channel, British manufacturing activity expanded at its fastest pace in 10 months in March, driven by a pick-up in new orders, and increasing the chance that Britain’s economy grew in the first three months of 2012 and avoided a recession. Asia’s economic fate remains closely tied to that of its export customers in the US and Europe. The brighter Asian figures, released on Sunday and Monday, still suggested economic growth slowed in the first quarter of 2012. China appeared to be headed for its weakest quarter since early 2009, at the depths of the global financial crisis. China’s official Purchasing Managers’ Index hit an 11-month high with a stronger-than-expected reading but a separate private survey by HSBC painted a gloomier picture.