GLOBAL ECONOMY-Asian factory output strong, inflation mounting

* S.Korea factory activity picks up, Australia at 8-yr high

* India continues expansion but pace eases a tad

* Inflation pressures building, more policy tightening seen

* China’s economy (Read more about the fastest growing economy.) retains momentum, weekend PMI report
shows

* S.Korea, Indonesia inflation higher than expected

By Wayne Cole

SYDNEY, May 3 (BestGrowthStock) – Factories in Asia-Pacific cranked
up production last month, with Australia surging at its fastest
pace in eight years, and mounting inflation pressures pointed
to further policy tightening as the economic recovery gathers
steam.

Output growth in India eased a tad in April but still held
near a 20-month high hit in February while factory activity in
South Korea picked up after a brief dip, surveys by HSBC/Markit
showed on Monday. [ID:nSUL000043]

The findings were similar to that in China’s official
survey of purchasing managers released on Saturday, which
showed its fast-growing economy retained its momentum in April
despite a government’s campaign to cool the red-hot property
sector. [ID:nTOE64000C]

Policymakers in Asia have been leading the rest of the
world in withdrawaling stimulus put in place during the global
crisis and a further buildup in price pressures last month
backed views that central banks will continue to tighten
policy.

“In our view, India is in for a protracted period of rate
hikes, the extent of which will surprise most forecasters,”
said Robert Prior-Wandesforde, senior Asian economist at HSBC.

India’s PMI showed seasonally adjusted input prices
remained near multi-year peaks, suggesting official wholesale
price inflation could pick up from a 17-month-high of 9.9
percent in the latest data for March.

The Reserve Bank of India raised its key interest rates and
bank reserve requirements by 25 basis point each in April and
analysts in a Reuters poll expect it to tighten policy further,
raising the repo rate by 100 basis points to 6.0 percent by the
end of December. [ID:nSGE63C0BD] [RBI/INT]

On Sunday, China raised banks’ reserve requirements by 50
basis points for its third increase of that magnitude this year
as it moves to calm the surging economy.

The PMI survey showed input prices in China rose at the
fastest pace since the second half of 2008, keeping alive the
fears of an overheating in an economy that grew in the first
quarter at an annual pace of 11.9 percent, the fastest since
2007. [ID:nTOE64100Q]

The purchasing managers’ index from the euro zone and the
United States, both due later in the day, are also expected to
show a pick up in activity. [ID:nN30169806]

QUICKENING INFLATION

The central banks of Australia, India and Brazil are the
only Group of 20 countries to have raised interest rates since
the global downturn.

Financial markets are pricing in a 70 percent chance
(CSRBA=CSAU: ) that the Reserve Bank of Australia will lift its
cash rate by 25 basis points to 4.5 percent on Tuesday, which
would be the sixth hike since October [AU/INT].

The Australian Industry Group/PriceWaterhouseCoopers
performance of manufacturing index jumped 9.3 points in April
to 59.8, well above the 50 threshold between contraction and
expansion and the highest reading since May 2002.
[ID:nSYU009838]

“The encouraging results across much of the manufacturing
sector in April are signs the recovery, which has been patchy
to date, is now beginning to gain some traction,” said Heather
Ridout, the chief executive of Australia Industry Group.

With economic recovery comes inflation.

The TD Securities-Melbourne Institute measure of
Australia’s consumer price inflation rose 0.4 percent in April
from the previous month, lifting the annual pace to 2.9
percent, near the top of the central bank’s long-term target of
2-3 percent. [ID:nSYU009841]

Other data showed house price rose in the first quarter by
a fifth from a year earlier, a record pace.

Inflation also picked up in South Korea and Indonesia in
April, with consumer prices rising more than expected in both
countries. [ID:nTOE641018] [ID:nJAK385347]

Stock Market News

(Additional reporting by Anooj Debnath in MUMBAI, Cheon
Jong-woo in SEOUL, Writing by Kazunori Takada; Editing by Neil
Fullick)

GLOBAL ECONOMY-Asian factory output strong, inflation mounting