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Asia factory activity picks up; Britain coasts along

An employee stands next to coils of steel inside a factory in Dalian, Liaoning province, October 18, 2013. REUTERS/China Daily

By Natalie Thomas and Andy Bruce

BEIJING (Reuters) - Demand for exports drove the fastest upturn in Asia's factories in months during October, led by China, as Friday's business surveys also showed UK manufacturers still expanding.

The latest batch of purchasing managers indexes (PMIs), which survey thousands of manufacturers worldwide, showed Chinese factory growth hitting an 18-month high, and British factories sustaining a solid rate of expansion.

Although data from the U.S. due later on Friday are expected to show a slight slowdown in industrial growth, taken together, the PMIs point to a gradual improvement in global economic activity.

They follow a month in which a political standoff in Washington over the U.S. debt ceiling and the sixth straight cut in IMF global economic forecasts had raised fresh concerns about the health of the global economy.

"Overall, the data is positive for global demand," said Radhika Rao, an economist with DBS in Singapore. "There are reasons to be optimistic, but cautiously optimistic," she said.

The raft of Asian PMIs showed why.

Taiwan's PMI reached its highest level since March 2012, Indonesia's index hit a four-month high and Japan's PMI rose to its strongest level in well over three years.

The major Asian economies of China, Japan, South Korea and India reported new export orders expanding simultaneously for the first time since May, which economists attributed partly to the gradual improvement in Europe.

Most major European PMIs, including that for the euro zone, come next week because of a holiday. But Britain, which has been at the forefront of Europe's tentative economic recovery, saw continued growth.

Data company Markit said its October UK manufacturing PMI edged slightly lower to 56.0 from a downwardly revised 56.3 in September. But anything over 50 means expansion and the latest number remains within striking distance of August's two-year peak of 57.1. (GB/PMIM)

"With the domestic economy recovering strongly, all important export markets either growing or at least improving and a broadly stable exchange rate, output in this key sector looks set to contribute its share to the recovery," said Christian Schulz, senior economist at Berenberg.


China's official PMI rose to 51.4 in October from 51.1 in September, topping expectations for a reading of 51.2.

A similar report from HSBC/Markit increased to 50.9, a seven-month high. It showed a tick up in the pace of new domestic and export orders, as well as the first increase in employment in seven months.

"The PMI data for October shows a continued increase, indicating a preliminary stabilization in the economy," Zhang Liqun, an economist at the cabinet think-tank Development Research Center, said in a statement released with the official PMI.

China's reassuring PMI reading limited losses in Asian stocks, which were under pressure after strong U.S. data added to uncertainty over when the U.S. Federal Reserve might begin to ease back on its stimulus.

India was the exception among a group of generally upbeat PMI reports in Asia. Its HSBC/Markit PMI was unchanged at 49.6 in October, indicating the sector was contracting for a third month, despite rising export orders.

The HSBC/Markit PMI for South Korea showed factory activity expanded for the first time in five months in October and a separate report said the value of exports in the month beat expectations to hit a record high of $50.5 billion.

Factory activity in major exporter Taiwan, key to many global tech supply chains, was running at its fastest pace since March 2012, while Japan reported on Thursday that factory activity grew at the fastest pace in more than three years.

(Additional reporting by Stanley White in TOKYO, Natalie Thomas in BEIJING, Faith Hung in TAIPEI and Se Young Lee in SEOUL; Writing by Subhadip Sircar and Andy Bruce; Editing by Jeremy Gaunt)