By Nigel Davies
LONDON, April 1 (Reuters) - Global factory activity remained in the dumps in March but showed signs it may begin to crawl out of one of the deepest downturns on record in the second quarter, key survey data showed on Wednesday.
Manufacturing activity in the euro zone and UK inched away from dire February lows, but was still miles off the once healthy levels enjoyed last year and contracting sharply.
The euro zone purchasing manufacturers' index of around 3,000 companies rose to 33.9 in March from 33.5 the previous month. [ID:nL1217903] The UK PMI saw a bigger bounce, up to 39.1 from 34.9, sending sterling up against the euro. [ID:nL186671]
But both were both well off the 50 mark that separates growth from contraction, suggesting both the UK and euro zone will see their economies shrink in the first quarter at a similar pace to the dismal display seen in the final three months of last year.
"There are a few spots where we can have hope ... but for the time being it's all hope. There are no clear signals that the recession will end any time soon," said Juergen Michels, an economist at Citi.
A similar tale is being told further afield too. The pace of factory decline worsened again in China in the past month, but still hinted that the worst may have passed. [ID:nPEK265513]
However, Japan suffered worse than most, where business investment crashed to a new low as the export-led economy is stung by falling demand.
But data due later should confirm the world's largest economy is inching away from a savage recession. The U.S. Institute for Supply Management (ISM) index is forecast to rise to 36.0 from 35.8 when it is released at 1400 GMT.
But the crumbs of comfort will not cheer many who fear the world economy will slide into a deep recession.
On Tuesday the Organisation for Economic Co-Operation and Development forecast member economies would contract by 4.3 percent this year, obliterating the 0.4 percent contraction forecast it made back last November.
The OECD also said international trade would slump a massive 13.2 percent this year, dragging export reliant economies like Germany and Japan down sharply.
"A genuine recovery hinges critically on the resumption of foreign trade, and we are definitely not there yet. More pain lies ahead, even though the worst may be behind us," said Marco Valli at UniCredit.
Data from the 16-nation euro zone bloc will surely convince the European Central Bank that interest rates will need to come down to a new low tomorrow as economists now widely expect. [ECB/INT]
"The ECB will do another 50 basis points tomorrow and probably extend the liquidity provision to banks," said Michels at Citi. And while there were signs that survey data may have hit a bottom in the first quarter, the after-effects such as soaring unemployment will ripple through the economy for some time.
The employment index for the euro zone PMI sank to a record low in March as factories slashed jobs. Official euro zone unemployment also jumped by more than expected in February to 8.5 percent from 8.2 percent at the start of the year and will likely keep on climbing. "Saying the 'worst has passed' implies we turned the corner. I'm not sure that's the case. Job cuts (are) still accelerating," said Kenneth Broux at Lloyds TSB. (Additional reporting by Alan Wheatley in Beijing, Fiona Shaikh in London, Tetsushi Kajimoto and Leika Kihara in Tokyo) (Editing by Toby Chopra)