Manufacturing From China to U.S. Expanding in Global Recovery

April 2 (Bloomberg) -- Factories from China to the U.S. accelerated in March, pointing to a rebound in international trade that is contributing to a global economic recovery.

Manufacturing in China grew for a 13th month and U.S. factories expanded the most since July 2004, reports showed. Business sentiment in Japan rose to the highest since 2008, while factories in Britain and the euro region stepped up production.

Surging economic growth in China is helping pull the global economy out of its worst slump in more than six decades and benefiting companies from Honeywell International Inc. in the U.S. to Germany’s Bayerische Motoren Werke AG. Stocks around the world rallied after the manufacturing figures showed the expansion may be gaining strength.

“It is a global growth story, clearly a revival of global trade,” said Jay Feldman, an economist at Credit Suisse in New York. “U.S. manufacturing is firing on all cylinders, with exports doing some of the heavy lifting. It’s a sign global growth is strong.”

The Purchasing Managers’ Index for China rose to a seasonally adjusted 55.1 in March from 52 the previous month, Hong Kong-based Li & Fung Group said yesterday. Readings above 50 signal expansion.

In the U.S., the Institute for Supply Management’s factory index rose to 59.6, exceeding the most optimistic forecast in a Bloomberg News survey of 77 economists, from 56.5 in February. The Tempe, Arizona-based group’s gauge of exports rose to the highest level since 1989, while orders and production increased at faster rates.

Japan, Europe

The Tankan index of sentiment in Japan improved to minus 14 in March from minus 25 in December, while Europe’s factories expanded at the fastest pace in more than three years. A gauge of U.K. manufacturing rose to a 15-year high.

The MSCI Asia Pacific Index climbed 0.9 percent to 126.25 yesterday. The Stoxx Europe 600 increased 1.3 percent to 267.02 at 4:41 p.m. yesterday in London, while the Standard & Poor’s 500 Index advanced 0.7 percent to 1,177.96 at 12:37 p.m. in New York on April 1.

The International Monetary Fund forecasts the global economy will grow 3.9 percent this year after a 0.8 percent contraction in 2009 with China expanding 10 percent, almost five times the pace expected for the U.S. The euro area economy may expand 1 percent, the IMF forecast in January.

In China, the acceleration may buttress the case for Premier Wen Jiabao’s government to consider allowing gains in the yuan for the first time since mid-2008 and raising interest rates. Central bank Governor Zhou Xiaochuan said last month that “sooner or later” China will end the contingency measures it adopted during the global recession.

Led by China

“There’s a very strong pick-up in global trade,” said Jacques Cailloux, chief European economist at Royal Bank of Scotland Group Plc in London. “It’s a cycle that started in Asia led by China that’s now filtering through to developed economies and Europe in particular.”

Manufacturing in Germany, Europe’s biggest economy, expanded at the fastest pace in 14 years, yesterday’s data showed. In Switzerland, a measure of manufacturing activity jumped last month to the highest in more than three years, while Ireland’s manufacturing industry grew for the first time since 2007.

In the U.S., the ISM’s gauge of export orders jumped to 61.5 in March, the highest since September 1989, from 56.5. The production index rose to 61.1 from 58.4 the prior month, and the new orders gauge increased to 61.5 from 59.5.

Honeywell, the Morris Township, New Jersey-based maker of controls for planes and buildings, this week raised its first- quarter profit forecast on stronger orders and cost controls. BMW, the world’s biggest maker of luxury vehicles, last month forecast 2010 deliveries to rise with Chinese sales projected to show a “strong double-digit” percentage gain.

“The expansion we’re seeing is largely an export story,” said David Tinsley, an economist at National Australia Bank in London. “So, even now you’ve got very robust rates of growth according to these PMI indices, it’s just covering some of the level lost. It’s not forging a new growth trajectory.”