GLOBAL ECONOMY-Factory output leaps ahead in January

* Euro zone PMI revised up but divergence widens

* UK factory activity expands at fastest pace in 15 yrs

* China PMI surveys show brisk growth, more tightening seen

* U.S. PMI expected to show growth pick-up

By Jonathan Cable and Aileen Wang

LONDON/BEIJING, Feb 1 (BestGrowthStock) – Manufacturing activity
continued to power ahead around the globe in January as
economies pull out of deep recessions but a widening divergence
in the euro zone will worry policymakers, data showed on Monday.

China’s vast manufacturing industry expanded at a near
record pace, Britain saw activity grow at its fastest rate in 15
years, India is leaping ahead after a slow patch and South Korea
and Australia also saw improvement.

But while the euro zone manufacturing sector grew at its
fastest pace in two years in January there is a widening
divergence between struggling Spain, Greece and Ireland compared
to buoyant Germany, France and Italy. [ID:nLDE6100KF]

“That could hinder the recovery in the euro area as a whole
— and raises the chances of the euro group having to bail out
members who cannot cope with their fiscal difficulties,” said
Colin Ellis at Daiwa.
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For global manufacturing PMI graphic see:
http://graphics.thomsonreuters.com/0210/GLB_MPMI0210.gif

For graphic on China, India and South Korea PMI: see
http://graphics.thomsonreuters.com/0210/AS_PMI0210.gif))
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Analysts see a one in five chance Greece, set to become the
16-nation bloc’s most indebted member this year, will need to
seek a bailout and say Ireland, Spain and Portugal are the
economies most likely to suffer a similar setback in investor
confidence. [ID:nLDE60D21I]

CHINA BOUNCE

A pair of surveys showed on Monday that China’s vast
manufacturing industry expanded at close to record pace last
month as the world’s third-largest economy continues to lead the
global recovery. [ID:nTOE61003S]

India, another emerging power that avoided recession and is
coming out strongly from a soft patch, saw its factory sector
expand at its fastest clip in nearly 18 months. [ID:nBMA006909]

Russia in January recorded its second expansion in activity
in the last 18 months. [ID:nLAG006073]

South Korean and Australian manufacturing surveys showed
improvement too, in part feeding off China’s growth burst in the
past quarter that brought it back to its cruising speed of more
than 10 percent. [ID:nSEW002160]

In the United States, the Institute of Supply Management
survey due at 1500 GMT is also forecast to show a pick-up in
growth, but only compared with a downward revised December
figure. The index is seen edging up to 55.2 from 54.9, though
last month’s original reading was at 55.9 points.

With interest rates at record lows and budgets deficits at
multi-year highs after costly crisis-fighting efforts, investors
are keen to see any signs that the recovery spurred by massive
policy stimulus can carry forward without more public aid.

COSTLY RESCUE

The cost of preventing the global recession from turning
into depression will be evident in U.S. budget estimates due at
1500 GMT. The White House will predict a record $1.6 trillion
deficit for the fiscal year 2010, a congressional source told
Reuters. [ID:nN31153033]

Beijing’s steps to cool buoyant credit growth to prevent
overheating also fanned concerns that they may prove too
heavy-handed and derail the upturn at a time when other big
economies have yet to regain their momentum.

Chinese bank lending slowed sharply in the final 10 days of
January, according to a newspaper report, but there was little
evidence yet in Monday’s data that the crackdown was hurting
activity.

An index based on an official survey of purchasing managers
last month eased from a 20-month high in December but remained
firmly in expansionary territory, while an index derived from a
companion poll by HSBC scaled an all-time high.

Both reports also showed a further rise in cost pressures,
leaving the authorities little choice but to keep tightening
policy after they have steered debt yields higher at auctions,
raised banks’ reserve requirements and reined in lending.

Despite growing concerns that Beijing’s tightening campaign
will sap demand for South Korean exports, January’s purchasing
managers’ survey marked the fastest manufacturing expansion in
more than two years for South Korea, largely due to still rising
export orders.

Australia’s manufacturing survey also showed expansion last
month and a jump in new orders suggested a further pick-up ahead
even as it remains the only G20 economy to have started raising
interest rates to cool mounting price pressures. [ID:nSGE60U02D]
[ID:nSGE60U02J]

Stock Basics
(Additional reporting by Yoo Choonsik and Cheon Jong-woo in
SEOUL, Wayne Cole in SYDNEY and Anurag Joshi in MUMBAI; Writing
by Tomasz Janowski; Editing by Jan Dahinten and Stephen Nisbet)

GLOBAL ECONOMY-Factory output leaps ahead in January