GLOBAL ECONOMY-Europe shows stronger footing, US still weak

* Euro zone PMI surprises by surging ahead

* PMIs suggest quarterly growth of 0.6-0.7 percent

* Upbeat data contrasts with U.S. jobless, other reports
(Updates with data from U.S., Brazil and on euro zone
confidence, adds background, dateline, byline)

By Caroline Valetkevitch and Jonathan Cable

NEW YORK/LONDON, July 22 (BestGrowthStock) – Europe and the United
States gave contrasting signals on the outlook for the global
economy, with the euro zone showing strength and U.S. reports
reinforcing concerns about slower growth.

The euro zone’s private sector surged more than expected in
July, data showed Thursday. New U.S. claims for jobless
benefits climbed more steeply than anticipated last week.

Another report showed U.S. existing home sales fell to a
three-month low in June — although the number was not as bad
as analysts had expected — and the supply of unsold homes rose
to its highest level in almost a year.

The data came a day after Federal Reserve Chairman Ben
Bernanke warned the U.S. economic outlook was “unusually
uncertain” and indicated further monetary easing might be
necessary to support the world’s biggest economy. For details,
see [ID:nN21165172]

“People have become somewhat adjusted to the (U.S.) jobless
claims being surprisingly bad, but since early June we haven’t
really had any bright spots in our data,” said Dan Cook, senior
market analyst, IG Markets in Chicago.

The U.S. economy resumed growth about a year ago but
stubbornly high unemployment and recent weak data from
manufacturing and other areas have raised concerns about a
significant slowdown.


European purchasing managers’ indexes showed private sector
business activity accelerated in July, surprising economists
who had expected a slowdown and indicating third-quarter euro
zone growth of around 0.6-0.7 percent, analysts said.

That would be double forecasts in a Reuters poll last week
for 0.3 percent growth.

Markit’s Eurozone Flash Services PMI, made up of surveys of
2,000 businesses ranging from hotels to banks, jumped to 56.0
in July from 55.5 in June, easily outpacing expectations for
55.0 and beating out even the most optimistic forecast polled
by Reuters for 55.5. [EUR/PMIS]

The euro zone’s manufacturing sector, which drove a large
part of the economy’s return to growth in the third quarter of
last year, also accelerated.

Also, figures showed consumer confidence in the euro zone
climbed to a 26-month high in July. [ID:nLDE66L1RP]

But data earlier this month showed a euro zone services PMI
fell for the third time in four months, triggering concerns
among analysts.

“My big issue is whether there will be a slowdown in the
second half of the year and on the basis of what we are hearing
from the U.S. economy and signs of a cooling off in China, I
think it is very likely we will see a slowdown,” Ken Wattret at
BNP Paribas, said after Thursday’s data.

The U.S. Labor Department report showed initial claims for
state unemployment benefits rose 37,000 to a seasonally
adjusted 464,000 in the week ended July 17, more than erasing a
decline in the prior week. Analysts polled by Reuters had
forecast claims rising to 445,000. [ID:nN22228055]

Last week’s jobless benefits data showed new claims fell to
a near two-year low in the prior week, and U.S. job growth has
slowed after gains early in the year.

Also in the United States, a report from the National
Association of Realtors showed home sales fell 5.1 percent to
an annual unit rate of 5.37 million units. A report earlier
this week showed new U.S. home construction hit its lowest in
eight months in June.

A Reuters poll of more than 600 economists published last
week suggested the world economy will cool a bit in the next
few months as China and the United States gear down.

But many major central banks have started looking at exit
strategies from their loose monetary policies. Canada,
Australia and India have already raised interest rates.

Bernanke said on Wednesday the Fed stood ready to ease
monetary policy further if the recovery falters, but also
indicated the Fed does not expect the economy to stall, and
does not foresee any extra policy measures being needed.


Last week, data showed a slight moderation in China’s
runaway economic growth in the second quarter.

China’s growth moderated to 10.3 percent in the second
quarter from 11.9 percent in the first quarter and a Reuters
poll of economists this month forecast 10 percent growth
overall this year. (CNGDP1: )

The slowdown in China has fueled market expectations that
Beijing might also hold off tightening policy or even announce
new stimulus measures.

The Bank of England, which has cut rates to record lows and
injected billions of pounds into the money supply, discussed
further easing as well as tightening at its last policy-setting
meeting, according to minutes released on Wednesday.

Analysts say the European Central Bank is unlikely to flirt
with new easing measures.

Brazil’s central bank on Wednesday slowed the pace of its
increases to interest rates as signs grew that the country’s
fast-growing economy was slowing. [ID:nN22201157]

Adding to U.S. economic concerns, earnings reports for the
last quarter have shown mixed results, with
stronger-than-expected profits but disappointing revenues.

Package delivery company United Parcel Service (UPS.N: ) was
among companies giving a more optimistic outlook.

“Clearly, this is a business-led recovery,” UPS CEO Scott
Davis said. “You’ll see industrial production grow faster than
GDP. That’s driven by the manufacturing side.” [ID:nN21172096]

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(Reporting by Jonathan Cable in London and Caroline
Valetkevitch in New York, with additional reporting by Helen
Chernikoff and Ryan Vlastelica; Editing by Eric Walsh)

GLOBAL ECONOMY-Europe shows stronger footing, US still weak