December factory output accelerates in U.S., Europe

A worker of the Beijing Capital Tire factory checks a tyre as part of a quality control procedure on the assembly line in the factory in this September 15, 2009 file photo.

NEW YORK/LONDON (Reuters) - Manufacturing in the United States and Europe accelerated in December, while growth in China and India slowed to more sustainable levels in another boost for the global economic outlook.

Purchasing managers' indexes showed manufacturing growth quickened in Europe and the United States, supported by surging new orders, while robust but slowing growth in India and China eased concerns about inflation and tighter monetary policy.

Investors moved into riskier, more economically sensitive assets. US copper futures hit a record high on expectations of sustained demand in the top metals consumer, China, oil prices rose well above $90 per barrel, and global equity prices surged, with the Nasdaq 100 hitting a 10-year high.

"We're off to a new start, and people are optimistic," said David Carter, chief investment officer at Lenox Advisors in New York. "Expectations are high that the economy will continue to recover in 2011."

Manufacturing in the United States, the world's biggest economy, grew for a 17th straight month in December, according to an industry report released on Monday, adding to recent evidence that a recovery in the U.S. economy was picking up steam.

The Institute for Supply Management said its index of national factory activity rose to 57.0 last month from 56.6 in November, in line with the Reuters survey.

A surge in new orders, the most forward looking element of the survey, offset concerns about a slowdown in the employment index, although investors said it was too early to rule out another round of stimulus from the Federal Reserve.

In fast-growing China and India, manufacturing expanded robustly, though at a slower pace, easing some concerns about possible overheating in Asia. South Korea's factories posted their biggest surge in seven months.

Powerhouses Germany and France continued to lead the 17-nation single currency zone's industrial recovery.

But output also grew faster in much of the area's smaller economies -- where debt concerns continued to drive financial markets on the first trading day of 2011 -- as export orders revived following steady declines in the value of the euro.

"Germany remained the star performer, seeing near-record growth, followed by France, where the PMI slipped only slightly from November's 10-year peak," said Chris Williamson, chief economist of index compiler Markit.

The robust picture in global manufacturing was reinforced by JPMorgan's global PMI, which rose to 55 in December from 53.9 in November.

EURO EXPORT BOUNCE

The Markit Eurozone PMI, which records manufacturing activity across all the major euro-area economies, rose to 57.1 in December, revised higher from a preliminary reading of 56.8 and up from 55.3 in November and near April's 46-month high.

In Germany, manufacturers boosted their workforces at the fastest rate in at least 14 years, and the headline index rose to a revised 60.7, its highest level since July.

Ireland's PMI hit its highest level since May, and Spain's index rose on the back of its strongest monthly surge in foreign orders in more than a decade, though factory output in recession-mired Greece remained in the doldrums.

The growth outlook for Europe remains modest, with cuts in public finances expected to weigh for years. Analysts polled by Reuters last month expected quarter-on-quarter growth in the euro zone to peak at 0.5 percent over the next two years.

Emerging economies have bounced back far faster from the global financial crisis, but they are also grappling with inflationary pressure driven by higher food and fuel prices and a strong influx of funds.

Indonesian consumer prices rose nearly 7 percent on the year in December, highlighting the risk that Asia's growth may come at the cost of tighter monetary policy.

In China, the official PMI edged down to 53.9 from November's 55.2, data on New Year's Day showed. That eased worries about overheating in an economy that saw inflation reach a 28-month high in November. In India the HSBC Markit PMI remained high at 56.7, albeit down from November's six-month high of 58.4.

"Perhaps we are seeing early signs the policy tightening in China and India is having some effect on domestic activities, while the pick-up in the U.S. and Germany and Europe is benefiting smaller exporting countries," said Robert Prior-Wandesforde, economist at Credit Suisse in Singapore.

Japan's manufacturing activity contracted for the fourth straight month, though the index rose to 48.3 from November's 47.3, showing the contraction had at least eased, according to data last week.

(Additional reporting by Ryan Vlastelica and Tony Munroe; Editing by Padraic Cassidy)