GLOBAL ECONOMY-Prices, jobs in focus as manufacturing improves

* U.S. manufacturing grows fastest in almost 6 years

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

* Euro zone manufacturing ticks higher, led by Germany

* Price pressures building, more policy tightening seen

* China’s economy (Read more about the fastest growing economy.) retains momentum

By Edward Krudy

NEW YORK, May 3 (BestGrowthStock) – Factories worldwide cranked up
production last month, offering hope a recovery in the U.S. is
firming up ahead of a key jobs report this week but raising
more concerns about inflation in Asia.

U.S. manufacturing increased at its fastest pace in almost
six years in April, while Australia led the Asia-Pacific region
with manufacturing there expanding at an 8-year high. Activity
in the euro zone hit a 46-month high thanks to a record
performance from Germany.

A stronger reading in the Institute for Supply Management’s
employment sub index also eased concerns that the recovery in
the United States is still struggling to generate new hiring by
employers ahead of Friday’s non-farm payrolls data.

“The way they are ramping up production now, manufacturers
must be mere months away from having to go out and actually
hire more workers,” said Chris Rupkey, chief financial
economist at Bank of Tokyo-Mitsubishi UFJ in New York.

“This data to me suggests that the sub-par jobless
recovery, that those days are numbered.”

Economists expect the U.S. economy added 200,000 jobs last
month, up from 162,000 the month before, according to a Reuters
survey. The number is still small number compared to the
millions of jobs lost in the recession.

U.S. stock indexes were higher after the ISM report while
bonds fell as investors unwound defensive positions, helped by
some easing of fears of a possible debt default by Greece.

The Institute for Supply Management said its index of
national factory activity rose to 60.4 in April from 59.6 in
March, The median forecast of 77 economists surveyed by Reuters
was for a reading of 60.
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For graphic on U.S. ISM

http://graphics.thomsonreuters.com/10/US_PMI0510.gif

For graphic on S.Korea and India PMI

http://link.reuters.com/kaj42k
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PMI surveys in Asia showed very high levels of factory
activity. The strong performance highlighted concerns about
price pressures in the economies leading the recovery, where
policy makers have been withdrawing stimulus from the economy.

LAGGARDS

Manufacturing in the euro zone was helped by German
strength, but purchasing manager surveys (PMIs) also showed a
welcome improvement in laggards like Spain, Ireland and Italy.

But compilers Markit said worries about the fallout of the
Greek debt crisis would continue to weigh.

European finance ministers triggered a record 110 billion
euro ($146.5 billion) bailout for Greece on Sunday but the euro
fell on Monday on doubts about whether Athens can sustain the
austerity package it has promised.

“Greece’s woes have deepened, with ongoing contraction and
an accelerating downturn in export orders suggesting that the
government’s growth forecast for 2010 is looking increasingly
optimistic,” said Chris Williamson, chief economist at Markit.

By contrast, fears about the performance of economies
further east centre around whether they might be overheating.

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.

The PMI survey showed input prices in China rose at the
fastest pace since the second half of 2008, keeping alive 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.

That backed views that central banks across the region
would continue to tighten policy much faster than their
counterparts in the West.

“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.

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

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

Financial markets are pricing in a 70 percent chance that
the Reserve Bank of Australia will lift its cash rate by a
further 25 basis points to 4.5 percent on Tuesday, the sixth
hike since October. [ID:nSGE642005]

Stock Market

(Additional reporting by Anooj Debnath in MUMBAI, Cheon
Jong-woo in SEOUL, Chris Reese in NEW YORK, Writing by Kazunori
Takada and Andy Bruce; Editing by )
(Reporting by Edward Krudy; Editing by Patrick Graham)

GLOBAL ECONOMY-Prices, jobs in focus as manufacturing improves