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Australian, U.K. economies humming; eurozone not so much

Port Hedland, China's gateway to Australia's natural resources, is as busy as everPort Hedland, China's gateway to Australia's natural resources, is as busy as ever
Port Hedland, China's gateway to Australia's natural resources, is as busy as everBloomberg

Australia’s economy grew at its strongest clip in two years in the first quarter of 2014, defying expectations that the slowdown in China would hit output in its key mining sector.

Gross domestic product, which values the total goods and services produced by an economy, rose 1.1% in the quarter and was up 3.5% from a year earlier, the Australian Bureau of Statistics said. That was above expectations for a 0.9% increase and the first time the annual growth rate has topped 3% since 2012.

And it was the mines that made the difference. Their output rose by a whopping 8.6% in seasonally adjusted terms, making them responsible for over three-quarters of the growth reported.

However, that figure was flattered by the fact that the first quarter in Australia is usually cyclone season, and this year’s weather has been nowhere near as severe as usual, meaning that more mines have continued to operate and ship normally.

Given the huge trade ties with China, the Australian figures add, indirectly, to evidence that the Chinese economy is still far from the kind of hard landing that some have predicted for it as the government tries to shift its emphasis from the investment-heavy export sector to the domestic consumer. Recent survey data from China have indicated that manufacturing activity in May was at its highest so far this year.

Separate figures released Wednesday showed that Australia’s exports of iron ore to China from Port Hedland, the world’s largest bulk-export terminal, hit a new record of 29.9 million tons in May, up from 23.3 million a year earlier.

“Our miners are exporting their socks off and thank God because it’s having an impact, a positive impact, on our economy,” Bloomberg reported Treasurer Joe Hockey as saying.

Elsewhere Wednesday, there were also fresh signs of robust growth in the U.K. economy, where the latest survey of purchasing managers in the service sector, which accounts for over two-thirds of the economy, showed hiring expanded at its fastest pace in seven months.

In the eurozone, meanwhile, research firm Markit revised down its composite purchasing mangers’ index for May to 53.5 from an initial estimate of 54.0. However, that’s still above the 50 level that signifies expansion, and Markit said the 18-country currency looked likely to record its strongest quarter of growth for three years.

However, producer prices in the eurozone continued to grind lower, falling 0.1% on the month and 1.2% on the year, reinforcing expectations that the European Central Bank will take action Thursday to stop the region falling into deflation.