Euro zone private sector growth beats forecasts in August: PMIs

1 of 2. Workers are seen at a Vinci construction site in the financial district of La Defense, near Paris August 1, 2013.

Credit: Reuters/Benoit Tessier

By Jonathan Cable

LONDON | Thu Aug 22, 2013 4:44am EDT

LONDON (Reuters) - Business activity across the euro zone has picked up this month at a faster pace than expected, surveys showed on Thursday, led by Germany as it benefited from growing demand for its exports.

Survey compiler Markit's Flash Composite Purchasing Managers' Index (PMI) bounced to 51.7 from last month's 50.5.

It was the highest reading since June 2011 and beat all predictions in a Reuters poll whose median forecast was for 50.9. Readings above 50 signify expansion in activity.

While growth accelerated in the euro zone's biggest economy, it was a different story in France, the bloc's No.2 economy, which saw business fall as its economy went into a summer lull.

But Markit said the composite PMI, which surveys thousands of companies across the region and is used as an indicator of growth, pointed to a 0.2-0.3 percent economic expansion in the current quarter.

That is similar to a Reuters poll taken earlier this month that predicted growth of 0.2 percent this quarter.

"It's looking good. If the euro zone is picking up then that bodes well for the global economy. The wobble in France is a bit of a worry, but hopefully that will be corrected," said Chris Williamson, Markit's chief economist.

Growth returned to the region's dominant service sector - the services PMI rose above the 50 mark for the first time since the start of last year, coming in at 51.0 after 49.8 in July.

Similarly, growth quickened among manufacturers, whose PMI rose to a 26-month high of 51.3 from 50.3.

Both PMIs beat the median expectation in a Reuters poll and the services index came in above the most optimistic forecast. The manufacturing output index, which feeds into the composite PMI, bounced to a 27-month high of 53.4 from 52.3.

An earlier flash composite PMI from Germany showed the growth rate was the fastest in seven months but in France activity declined across the board.

Support from Germany and France, the 17-nation bloc's two biggest economies, helped it escape from its longest recession on record last quarter, expanding a better-than-expected but still modest 0.3 percent.

The problem faced by the European Central Bank in trying to stimulate growth - as it has been for some years - is still the heavily indebted south. But Williamson said manufacturing and services activity was improving in the periphery.

New business in the bloc increased for the first time in just over two years, and the composite subindex rose to 50.5 from 49.7, supported by orders coming in for manufactured goods from abroad at their fastest rate since May 2011.

Despite the upturn, expectations among services firms dipped from July's 16-month high and manufacturers reduced their workforce at a faster pace than last month.

"The job shedding in part reflects the need to keep costs down and remain competitive, but there is still some uncertainty about the outlook," Williamson said.

(This story corrects month in headline to August)

(Editing by Hugh Lawson) (Reporting by Jonathan Cable)

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German private sector grows in August at strongest rate since January: PMI

Robots connect side parts on an Audi A3 light weight construction chassis at the production line of the German car manufacturer's plant in the Bavarian city of Ingolstadt April 11, 2013.

Credit: Reuters/Michaela Rehle

BERLIN | Thu Aug 22, 2013 3:32am EDT

BERLIN (Reuters) - Germany's private sector expanded in August at its fastest rate since January, a survey showed on Thursday, in a sign Europe's largest economy is back on track after a contraction late last year and a subdued start to 2013.

Markit's preliminary composite Purchasing Managers' Index (PMI), which measures growth in both the manufacturing and services sector and covers more than two-thirds of the economy, rose to 53.4 in August from 52.1 in July.

That was comfortably above the 50 threshold that separates growth from contraction and was helped by a surge in new work.

"It's an increasingly buoyant-looking picture, with manufacturing seeing its best performance for a couple of years, and alongside that there's an improving service sector, so exporters are doing well and the domestic economy is healing," said Chris Williamson, chief economist at Markit.

"I would expect to see some job growth come through in the coming months which should further cement the picture of a sustainable looking upturn," he added.

He said the PMI survey pointed to economic growth of around 0.4 percent in the third quarter, a slight slowdown after the bumper growth of 0.7 percent in the April-June quarter driven by strong domestic demand and weather-related catch-up effects.

The positive PMI reading chimed with recent data which has pointed to an upturn in Europe's powerhouse economy, including rising industrial orders, output and exports, falling unemployment and sentiment improving overall.

A sub-index from Markit showed the manufacturing sector expanding at its fastest rate in more than two years in August as output was above the 50 threshold for a fourth straight month. Backlogs of work also increased.

Factories continued to shed jobs but Williamson said this was a reflection of Germany's need to be competitive as Japan and the United Kingdom benefit from their weakened currencies rather than a cause for concern about the economic outlook.

Manufacturing firms benefited from a surge in new orders, which increased at their sharpest rate since May 2011. New contracts from abroad, which have suffered from weaker euro zone demand and a slowdown in Asia in recent months, shot up for the first time since February.

Manufacturers also got a boost from bigger margins thanks to rising factory gate prices and falling input prices. Service providers, on the other hand, suffered a squeeze on their margins as their costs rose more sharply than output prices.

A sub-index tracking the service sector showed business activity increasing at its fastest pace since February as new orders rose, albeit at a slower pace than in July.

Service providers' business expectations were in positive territory for the ninth month in a row, boding well for future business activity, and firms hired new staff for the second straight month.

- Detailed PMI data are only available under license from Markit and customers need to apply to Markit for a license.

To subscribe to the full data, click on the link below: http://www/markit.com/information/register/reuters-pmi-subscriptions

For further information, please phone Markit on +44 20 7260 2454 or email economics@markit.com

(Reporting by Michelle Martin; Editing by Hugh Lawson)

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Ethics and management in the public sector / Alan Lawton, Julie Rayner and Karin Lasthuizen.

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China moves further towards milk powder sector consolidation: paper

An Abbott Laboratories sales staff carries a carton of powder milk tins out of a shop during a production recall outside Hanoi August 6, 2013.

Credit: Reuters/Kham

SHANGHAI | Fri Aug 16, 2013 2:52am EDT

SHANGHAI (Reuters) - The Chinese government is set to issue a formal proposal to prompt consolidation among domestic infant formula firms, a state-run newspaper said on Friday, naming Inner Mongolia Yili Industrial Group (600887.SS) as one of the likely beneficiaries.

The proposal is part of the government's drive to slash the number of domestic infant formula manufacturers over the next five years to 50 from about 200 now, the China Securities Journal said, citing an unnamed source.

By 2018, China expects the top 10 local companies to account for 80 percent of the domestic market, with the largest three-to-five firms targeting annual sales of over five billion yuan ($818.00 million), the report said.

The newspaper said Feihe International (ADY.BE) and Wondersun Dairy were also likely to gain from the consolidation plan, but gave no further details.

Analysts said the consolidation drive is part of a broader plan to boost consumption of local product and allay fears about food safety following a 2008 scandal, when formula tainted with melamine killed at least six infants and made thousands ill.

Last week, the country's price regulator also handed down record fines to foreign milk powder makers, including Mead Johnson, (MJN.N), Danone (DANO.PA) and New Zealand dairy giant Fonterra (FSF.NZ), for anti-trust behavior.

"The government sees a lot of room for consolidation and the real motive here is to improve the overall standards of infant milk formula products," said Sandy Chen, a Shanghai-based senior analyst for food and agribusiness at Rabobank.

Consumers in China are highly sensitive to food safety after persistent problems such as chemical-laced pork.

China's infant formula market is worth around $12.4 billion in 2012, and is set to double in size by 2017, according to data from Euromonitor.

In 2012, the ten biggest Chinese infant formula firms by market share were Zhejiang Beingmate (002570.SZ), Yili, Biostime International Holdings (1112.HK), Yashili (1230.HK), Daqing Dairy (1007.HK), Feihe International, Wissun Group, Wondersun Dairy, Synutra International (SYUT.O) and Ausnutria Dairy (1717.HK), the data showed.

($1 = 6.1125 Chinese yuan)

(Reporting by Adam Jourdan; Editing by Kazunori Takada and Miral Fahmy)

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