GLOBAL ECONOMY-Output climbs led by Asia, despite euro crisis

* Chinese, Indian PMIs climb despite global worries

* Euro zone PMI up but country divergence remains wide

* Japan warns of long deflation

By Jonathan Cable and Langi Chiang

LONDON/BEIJING, Dec 1 (BestGrowthStock) – Manufacturers in China and
India cranked up the pace of production last month and Germany
and France led the way in Europe, offering a boost to the global
economy in spite of a spreading euro zone debt crisis.

But while strong numbers from the largest European economies
provide good news for policymakers worried about the sovereign
debt crisis in Europe’s single currency bloc, they highlighted a
growing divergence among its members. [EUR/PMIM]

Data from Germany showed its manufacturing sector expanded
significantly faster last month than in October while France’s
PMI bounced to a level not seen in 10 years. [ID:nSLAUME6JC]

Italian numbers showed conditions improved at their weakest
rate for nine months, however, and Spanish manufacturing
stagnated. [ID:nSLAUME6JK] [ID:nSLAUME6JB]

Ireland, which accepted an 85-billion-euro European Union
emergency aid package on Sunday, saw a slight upturn in activity
but still below levels needed for a meaningful recovery and
Greek manufacturing activity contracted as it has done for the
past 15 months.

“It is worrying to see Italian activity lose momentum in
addition to ongoing weak activity in Spain, Ireland and,
especially, Greece,” said Howard Archer at IHS Global Insight.

The Irish bailout has failed to reassure investors and
global officials are also focusing on the problem, with the G20
deputy finance ministers holding a teleconference about it on
Monday and a top U.S. Treasury official travelling to Europe.

European policymakers came out in force on Tuesday to try to
calm markets, with European Central Bank President Jean-Claude
Trichet warning that pundits were underestimating the
determination of governments to keep the euro zone stable.

But markets paid little attention, targeting Portugal, Spain
and Italy only days after the EU came to Ireland’s aid.

Outside the euro zone, British manufacturing activity leapt
unexpectedly to a 16-year high in November. [GB/PMIM]

<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

For a graphic on euro zone PMI:

http://r.reuters.com/nyv87q

For a graphic on PMI for Asia’s top four economies:

http://link.reuters.com/neg87q

For a graphic on China’s PMI and output:
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

ASIAN GROWTH … AND INFLATION?

For all the maelstrom in Europe, there is little sign it is
derailing global economic recovery, driven by Asian powerhouses.

Signs of robust growth in China helped lift world stocks on
Wednesday while the euro halted its recent slide. [MKTS/GLOB]

Two Chinese purchasing managers’ indexes registered their
strongest readings in seven months and the story was similar in
India, where the HSBC Markit PMI climbed to a six-month high.
[ID:nTOE6B001C] [ID:nnBMA009007]

But the surveys also highlighted a worry for investors:
rising inflationary pressure in China and India and the need for
more monetary tightening in economies which have driven a large
part of the global recovery.

That, rather than Europe’s debt troubles, could pose the
biggest threat to global economic growth.

“Good news from the economy may not be that good for the
market as it is concerned about more tightening,” said Ting Lu,
an economist with Bank of America-Merrill Lynch.

“The high PMI reading could convince Beijing to tighten a
bit more on the margin.”

China raised interest rates in October for the first time in
nearly three years and most analysts still expect 2-4 more
increases by the end of next year although for now it is
focusing on raising banks’ required reserves to drain excess
cash from the economy and prevent inflation taking off.

India has already raised interest rates six times this year
and its strong PMI followed data on Tuesday that showed its
economy grew by a blistering 8.9 percent in the September
quarter from a year earlier.

That is likely to add pressure on the central bank to
continue raising rates, though traders do not expect another
hike until early next year. [ID:nBMA009007]

Thailand’s central bank surprised financial markets on
Wednesday by raising its benchmark interest rate, while the
Reserve Bank of Australia raised rates earlier this month.

Attempts to rein in runaway growth in Asia could be a bitter
pill to swallow with Europe teetering on the brink of more
serious debt troubles and the United States showing only
tentative signs of picking up.

The Institute for Supply Management is expected to say later
on Wednesday that the pace of manufacturing growth in the U.S.,
the world’s biggest economy, tailed off last month.

And in Japan, the picture is bleak.

Prolonged economic weakness may keep Japan in deflation
longer than the Bank of Japan’s current forecast, a member of
its policy board said on Wednesday, offering the bleakest view
to date by a central bank policymaker.

Board member Miyako Suda said there was a strong chance
Japan’s economy would contract in the final quarter of this year
after strong growth in July-September. [ID:nTOE6B002F]
(Additional reporting by Stanley White in Tokyo, Kim Yeonhee in
Seoul, Annoja Debnath in Bangalore, Simon Rabinovitch in Beijing
and Peter Griffiths in London; editing by Mike Peacock)

GLOBAL ECONOMY-Output climbs led by Asia, despite euro crisis