China manufacturing picks up, India going strong

A pair of China's manufacturing surveys showed activity picked up last month after a government-engineered slowdown and Indian factories stayed in top gear after Asia's third-largest economy grew at its fastest rate in nearly three years in the last quarter.

Factories in Russia -- part the BRIC quartet of new economic powers alongside China, India and Brazil -- also cranked up their output, expanding at their fastest rate in 28 months largely thanks to the strength of domestic demand.

Fears that recovery in the United States, the world's biggest economy, was petering out and could stall the global upturn led by export-driven Asian economies have haunted markets for weeks pushing the global stock index <.MIWD00000POUS> down more than 3 percent last month.

Trade data from South Korea, the world's ninth largest exporter showed its shipments abroad hit a five-month low last month, while a pair of Chinese surveys provided mixed messages about the strength of demand for the nation's exports.

An official survey compiled by China Federation of Logistics and Purchasing showed a pick-up in new export orders, while one produced by the HSBC bank showed export demand slipping for a third consecutive month.

Yet optimism that Beijing was succeeding in shifting toward a more domestic-driven and sustained growth after a credit-fueled spurt early this year helped lift Asian stocks and metals markets largely dependent on demand from China.

This reconfirms our long-held view that China is moderating rather than melting down, said Qu Hongbin, chief economist for China at HSBC.

The bank's HSBC purchasing managers' index (PMI) rose to a three-month high of 51.9 in August from 49.4 in July, while the official index also rose, to 51.7 from 51.2.

China, which by some measures has already overtaken Japan as the world's second-largest economy, has been exerting ever growing influence as exporter, importer and investor.

The China effect was at hand in Australia's second quarter economic performance when it grew by 1.2 percent, handily beating market forecasts largely with the help of China's and India's voracious appetite for Australia's resource riches from coal to wheat.

A manufacturing survey for August, however, showed that even the developed world's overachiever was not entirely immune to economic headwinds with factory activity and new orders growth slowing markedly.

A U.S. PMI index due from the Institute for Supply Management at 1400 GMT (10 a.m. EDT) is expected to ease to 53.0 in August from 55.5, still safely above 50 that separates growth from contraction.

Investors, however, will look at new orders data for any signs whether manufacturing growth can be sustained.

With unemployment stubbornly stuck near 10 percent and the impact of the government's $862 billion economic stimulus fading, investors and economists worry that even if the U.S. economy avoids a double-dip recession it may face a period of near-stagnation.

That would be bad news for Asia and Europe, which despite a recent shift in demand toward fast growing emerging economies such as China, India or Brazil, still largely rely on U.S. demand to keep their economies growing.

In Europe, euro zone manufacturing industry, led by the German export juggernaut, is expected to keep a solid pace of expansion even as doubts persist how long it can rely on exports to make up for the effects of spending cuts at home.

The Markit PMI index due around 0800 GMT is seen steady at 55.0

In South Korea, manufacturing sector activity barely expanded last month with export orders virtually stagnating. The government forecast that exports growth will slacken in the final quarter after buoyant growth this year that put Asia's fourth-largest economy at the forefront of the global recovery.

(Additional reporting by Yoo Choonsik in Seoul, Wayne Cole in Sydney, Lidia Kelly in Moscow and Yati Himatsingka in Bangalore; Writing by Tomasz Janowski; Editing by Kazunori Takada)