GLOBAL ECONOMY-Asia factory output expands, China slows a bit

* Growth in China’s factory output slows a touch

* India and S.Korea PMI rises further in February

* Surveys highlight build up in price pressures

By Langi Chiang and Alan Wheatley

BEIJING, March 1 (BestGrowthStock) – Factory activity in Asia’s
main economies expanded last month, with India and South Korea
growing at their fastest pace in around two years although
China showed some signs of weakening.

A pair of surveys of purchasing executives showed the pace
of manufacturing growth in the world’s third biggest economy
eased slightly in February, but economists said the recovery
trend remained intact.

“Policymakers are driving with low visibility on the
Chinese activity data at the moment,” said Brian Jackson, a
strategist with Royal Bank of Canada in Hong Kong, adding that
the timing of the Chinese New Year holidays complicated
interpretation of data.

“So it would be premature to conclude that today’s fall in
the headline PMI numbers show a broader easing in the momentum
of China’s recovery.”

The Purchasing Managers’ Index (PMI) derived from a survey
conducted by the China Federation of Logistics and Purchasing
for the National Bureau of Statistics (NBS) fell to 52.0 in
February, well below the median forecast of 55.45 in a Reuters
poll and from 55.8 in January. [ID:nBJB003693]

The Australian dollar (AUD=: ) dipped and copper prices
(SCFc3: ) pared their gains after the data, which markets took as
a sign Chinese demand for metals and other commodities might be
softening. Shanghai stocks (.SSEC: ), however, climbed in step
with other Asian markets.

A separate survey conducted by research firm Markit for
HSBC showed the PMI dipping to 55.8 from a record high of 57.4
in January. [ID:nTKC005738]

(For a graphic see
http://graphics.thomsonreuters.com/310/CN_PMI0310.gif)

PMIs for the euro zone and the United States are due to be
released later in the day. Russia’s PMI eased a touch to 50.2
last month, but the index continued to show expansion for the
second straight month. [ID:nLAG006131]

(For a graphic on China, India South Korea PMI see
http://graphics.thomsonreuters.com/310/AS_PMI0310.gif)

RISING INFLATION PRESSURES

India’s PMI rose to 58.5 in February, its strongest reading
since June 2008, from 57.7 in January, boosted by expanding
output and new orders. [ID:nSGN002335]

(http://graphics.thomsonreuters.com/310/IN_PMI0310.gif)

“At 58.5, the headline index is consistent with ongoing
double-digit gains in industrial production which in turn is
likely to mean that spare capacity is being eaten into
rapidly,” said Robert Prior-Wandesforde, Senior Asian Economist
at HSBC.

Signs of supply-side constraints in labour and product
markets were also emerging, which backed the case for further
monetary tightening next month.

“In our view, it is time to start unwinding the monetary
stimulus and we would be very surprised if the RBI were not to
raise policy rates at the 20 April meeting,” said
Prior-Wandesforde.

Price pressures were also building in South Korea, which
saw its headline PMI rise to the highest level since December
2007. Input prices rose for the third straight month while
output price index inched up to 51.8. [ID:nSEV002971]

“HSBC’s Korea PMI suggests that price pressures are
growing, something that official price series have not yet
picked up,” the report said.

Bank of Korea Governor Lee Seong-tae warned last month that
interest rates needed to be raised soon to head off
inflationary pressures, but markets doubt he will act before
his term ends next month.

The government has repeatedly expressed its opposition to
an early interest rate increase, fearing it could threaten the
country’s economic recovery and prompting investors to push
back their expectations for a rate rise deeper into 2010.

Stock Investing

(Additional reporting by Anurag Joshi in MUMBAI, Yoo Choonsik
in SEOUL; writing by Kazunori Takada; editing by Tomasz
Janowski)

GLOBAL ECONOMY-Asia factory output expands, China slows a bit