World Business

Global manufacturing slows in May

(Agencies)
Updated: 2010-06-02 11:33

NEW YORK: Manufacturing growth slowed across the globe in May but there was some relief in the United States where there was scant evidence of any impending slump caused by Europe's debt crisis.

Purchasing managers’surveys in China and the euro zone showed local economies grew at more sluggish pace. That stoked fears China may become less of a force for growth, while European economies could falter due to weakening domestic demand as governments cut swelling deficits.

In the United States, the headline number showed a slight slowdown but new orders and exports were stable, calming fears that Europe's crisis has started to drag on the world's largest economy. Employment numbers improved, a positive sign ahead of the government's payrolls report on Friday.

"There has been a slowdown in growth globally and in the euro zone there is subdued domestic demand due to the austerity measure implemented in some countries," said Luigi Speranza at BNP Paribas.

Global stocks headed higher after the US data, with European shares closing up. But much of the bounce in US equities had faded by the afternoon as investors continued to worry about the fall-out from Europe's crisis.

Purchasing managers in the limelight

The May global Purchasing Managers' Index surveys are being closely watched by investors because they could shed light on how the debt crisis in the euro zone is impacting the world economy.

Finance ministers and central bank chiefs from the world's leading developed and developing economies meet this week in South Korea and will discuss how Europe's debt crisis could derail the global economic recovery.

Related readings:  Wen: Global economy double-dip possible  Global economy not yet out of the woods, say experts  US Treasury chief in Europe for talks on finance crisis  Europe debt crisis to have limited impact on China

In the United States, the Institute for Supply Management said its index of national factory activity slipped to a reading of 59.7 in May from 60.4 in April, but it was still the 10th month the index was above 50, the level that signals expansion.

The index's employment component rose to a six-year high, while the new orders was unchanged at 65.7, and exports increased to 62 in May from 61 the previous month.

"We still remain at a remarkably high level," said Tom Porcelli, US economist at RBC Capital Markets in New York. "It's still consistent with an expansion in manufacturing, which we still expect will move along at a pretty decent clip."

A separate report in the United States showed construction spending rose unexpectedly in April, recording its largest monthly increase in nearly 10 years.