Global Factory Indexes Beat Forecasts as Slumps Ease

Manufacturing indexes from the euro region to the U.K. and Japan beat economists’ forecasts, suggesting contractions in factory production are easing.

A Markit Economics index of euro-area manufacturing output rose to 45.1 in May from an initial estimate of 44.8 earlier this month, and a measure for the U.K. rose to 48.6, exceeding the median forecast in a Bloomberg News survey. Readings below 50 indicate contraction. A gauge of sentiment among Japan’s large manufacturers showed they were more optimistic.

The data signals global manufacturing may be starting to weather the effects of the European sovereign debt crisis. Economists still predict the European Central Bank and Bank of England will seek to bolster stimulus this week to unblock credit markets and pull economies out of recession.

“We seem to have a bit of a bounce and this would point toward a softer landing for the global economy,” said Tom Vosa, director of economic research at National Australia Bank in London. “We expect further stimulus from the ECB and Bank of England this week with the second half looking better based on policy stimulus.”

In the U.S., manufacturing probably grew at a slower pace in June, with the Institute for Supply Management’s factory index showing a decline to 52.0, the lowest level in eight months, according to economists surveyed by Bloomberg. That data will be released at 10 a.m. New York time.

European Data

U.K. manufacturing shrank for a second month. Markit’s index rose from 45.9 in May and exceeded the median estimate in a Bloomberg survey of 25 economists for an increase to 46.5. Euro-area manufacturing shrank for an 11th month, and separate data today showed unemployment in the 17-nation bloc rose to a record 11.1 percent in May.

The ECB will probably lower its benchmark rate to 0.75 percent from 1 percent, according to the median estimate of 60 economists in a Bloomberg News survey. The U.K. central bank will probably expand its bond-purchase program by 50 billion ($78 billion) pounds to 375 billion pounds, according to economists in a separate poll. The banks will announce their decisions on July 5.

Japan’s quarterly Tankan index of sentiment was minus 1 in June from minus 4 in March, the Bank of Japan said today in Tokyo. The median estimate of 19 economists surveyed by Bloomberg News was for a reading of minus 4. A negative number means pessimists outnumber optimists.

The MSCI Asia Pacific Index (MXAP) added 0.4 percent in its fourth day of gains as of 11:50 a.m. in London. The Stoxx Europe 600 index rose 1 percent to 253.57, and the FTSE-100 index was up 0.6 percent to 5,606.

China Gauge

Factory data elsewhere in Asia signaled deterioration. A purchasing managers’ index for China, the world’s biggest exporter, fell to 48.2 in June from 48.4 in May, HSBC Holdings Plc (HSBA) and Markit said. A similar measure released by the government yesterday also slid, though by less than economists forecast. South Korea yesterday lowered its export growth forecast to 3.5 percent from 6.7 percent.

“The Asian manufacturers are finding that the lack of demand in many parts of the western world is beginning to wash upon their shores,” said Peter Dixon, an economist at Commerzbank AG in London. “Manufacturers are suffering from huge amounts of uncertainty and are holding back on investment.”

The Chinese purchasing managers’ index released yesterday by the Beijing-based statistics bureau and China Federation of Logistics and Purchasing fell to 50.2 in June from 50.4 in May, a smaller drop than the decline to 49.9 forecast in the median estimate of 24 economists surveyed by Bloomberg News.

Nike Inventory

Companies from Nike Inc. (NKE) to McDonald’s Corp. and Caterpillar Inc (CAT) are feeling the effects of a cooling Chinese economy. Nike said last week that it has too much inventory there.

South Korea’s exports rose 1.3 percent in June from a year earlier, the Ministry of Knowledge Economy said yesterday. That compared with the 0.5 percent median estimate in a Bloomberg News survey of analysts and an 11.1 percent increase a year earlier. Shipments to the European Union fell 22.7 percent from a year earlier in the first 20 days of June and sales to China were flat, the data showed.

India’s manufacturing PMI expanded at the fastest pace in four months in June, rising to 55 in June from 54.8 in May, a report from HSBC Holdings Plc and Markit Economics showed today.

To contact the reporter on this story: Jennifer Ryan in London at jryan13@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net

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