LONDON, March 1 (Reuters) - Global factories struggled to claw their way out of decline in February, with European powerhouse Germany squeezed by a steeper fall in demand while an uneven recovery in China overshadowed some signs of improvement in Asia.
A raft of business surveys released on Friday highlighted a patchy performance in Europe and Asia as the first quarter drew to a close.
Across the euro zone, manufacturing activity continued to contract last month amid weak demand although firms were optimistic about the year ahead.
HCOB's final euro zone factory PMI, compiled by S&P Global, dipped to 46.5 in February from January's 46.6, beating a preliminary estimate of 46.1 but below the 50 mark separating growth in activity from contraction for a 20th month.
The cost of raw materials declined at a softer pace in the region, largely due to the price of commodities rather than disruption in the Red Sea, the PMI survey showed, although official data showed prices rose a tad more than expected in February.
Policymakers at the European Central Bank are widely expected to wait until June before cutting interest rates as they continue their battle to get inflation back to a 2% target.
The manufacturing downturn in Europe's largest economy, Germany, deepened in February as output and new orders declined at a faster rate. In Italy, the sector contracted for an 11th straight month, although it did show some signs of improvement, and the downturn in France eased.
Outperforming was Spain where factory activity expanded for the first time in almost a year as domestic demand picked up.
Britain, outside the European Union, marked a year of falling output although its PMI did rise.
"Today's UK PMI and euro zone figures show that recovery in the manufacturing sector remains slow," said Boudewijn Driedonks at consultancy McKinsey & Company.
"Across the euro zone, there is increasing divergence in manufacturing activity. This marks a stark difference to last year where trends across countries were on a more similar trajectory."
MIXED BAG
There were conflicting signals out of China with the government's official PMI showing factory activity continuing to fall, in contrast to a slight pickup seen in the private-sector Caixin PMI.
Worryingly, recent data suggests the weakness seen in Japan in the second half of last year has continued, complicating the Bank of Japan's task as it looks to exit ultra-easy monetary policy.
"February PMI data indicated another month of deteriorating operating conditions in the Japanese manufacturing sector," said Usamah Bhatti at S&P Global Market Intelligence.
"Depressed demand in domestic and international markets continued to weigh on sector performance, as both production and new orders fell at the strongest rate for a year."
Japan unexpectedly slipped into recession in the fourth quarter and lost its title as the world's third-largest economy to Germany as consumer and business spending weakened.
Its PMI followed official Japanese data this week showing factory output falling at the fastest pace since May 2020.
China's patchy performance comes amid signs the world's second-largest economy is tentatively finding its footing after a deep slump caused by a property sector crisis.
Investors are looking ahead to China's annual meeting of parliament next week where policymakers will face pressure to do more to get the economy back on track.
But there were some signs conditions were improving in other parts of Asia.
South Korean export growth exceeded forecasts in February and India's PMI showed manufacturing activity expanded at its fastest pace in five months.
That followed data on Thursday showing India's economy grew at its fastest pace in one-and-half years in the final three months of 2023.
Elsewhere, Southeast Asia's key factory economies mostly saw growth with PMIs in Vietnam, Indonesia and the Philippines all pointing to expansion in activity although Malaysian and Thai PMIs both showed continued activity declines.
Writing by Sam Holmes and Jonathan Cable; Reporting by European and Asia bureaus; Editing by Shri Navaratnam, Kim Coghill and Susan Fenton
