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EU manufacturing expanding at fastest pace in 22 months

Europe’s manufacturing and services industries expanded at the fastest pace in 22 months this month as evidence mounted that the global economy is pulling out of the recession.

A composite index of both industries in the euro-area economy rose to 53 from 51.1 last month, London-based Markit Economics said yesterday. Economists forecast a gain to 51.6, according to the median of 13 estimates in a Bloomberg News survey. A reading above 50 indicates expansion.

European companies are stepping up output to meet reviving orders after governments around the world spent US$2 trillion in stimulus measures to fight the worst recession in at least six decades. The IMF said on Oct. 1 the global economy would expand at a faster pace than previously expected next year. Still, the euro’s ascent against the US dollar may curb a European recovery.

“The second half of the year will be relatively strong,” said Juergen Michels, chief euro-area economist at Citigroup in London. “Looking ahead, there are a lot of reasons for momentum to weaken, partly because of a stronger euro.”

The world economy will shrink 1.1 percent this year, less than the 1.4 percent projected in July, the Washington-based IMF forecast. Next year, the economy may expand 3.1 percent instead of a previously projected 2.5 percent, the fund said. In the euro region, the economy probably returned to growth in the third quarter, the European Commission forecast last month.

Adding to signs of global recovery, confidence in the world economy rose for a third straight month this month, a Bloomberg survey of users on six continents showed earlier this month. In the US, the world’s largest economy, industrial output increased more than expected last month and China’s manufacturing expanded at the fastest pace in 17 months.

Volkswagen AG, the biggest overseas carmaker in China, sold 150,000 cars last month, a monthly record, as sales for the first nine months were up 37 percent. Volkswagen is investing 4 billion euros (US$6 billion) to expand capacity in China through 2011.

“China is the steam engine of the world economy,” Volkswagen sales chief Detlef Wittig said on Sept. 25. “The lust for mobility there seems almost bottomless. We’re very well positioned there and will keep investing to secure our share of the market.”
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