US manufacturing showed signs of a gradual revival in May from its war-related slump, but factories in both Europe and Japan struggled as the dollar's sharp slide cooled exports from those countries, data showed.
That means the United States would likely again be the world's main engine of growth as the two other largest economic blocks remain stagnant with little evidence of a turnaround coming soon.
European leaders in France for the annual G8 get-together of leaders from the world's biggest economies called on Monday for a European Central Bank interest rate cut as a way of spurring growth and restraining the euro's rapid rise.
With inflation slowing in the euro zone, economists said it was almost certain the ECB would cut rates at its policy meeting tomorrow. Some analysts said the flagging pace of inflation in the United States also made it likely the Federal Reserve might also cut rates later this month.
"The demand picture in the US is starting to pick up while Europe remains quite weak," said Bruce Kasman, senior economist and director of global economic research at J.P. Morgan Securities in New York.
Mr Kasman said that for the ECB, "I don't think the issue is whether, it's how much at this point. We're believers they will go 50 basis points." He also said the Fed would likely cut rates by 25 basis points.
The US Institute for Supply Management's May manufacturing index jumped more than expected to 49.4, showing a third month of contraction but at a slower pace. It was close to the 50 level that divides growth from contraction and down from 45.4 a month earlier, easily beating forecasts of a rise to 48.6.
Growth in new orders, backlog orders and production indexes suggested that US factories could return to expansion as soon as June after output began contracting in March before the Iraq war.
In Europe, the euro zone's Reuters Purchasing Managers' Index showed a deeper contraction in May, falling 46.8 from 47.8 in April, and disappointing economists who expected an improvement.
Helping drag down the index was a sharp decline in export orders in Germany, the euro zone's largest economy, due to the euro's sharp 13 per cent climb against the dollar this year. The export orders index weakened to 44.1 from 47.6.
"We've seen a big drop in export orders, which is disturbing, and it clearly shows the effect of euro strength," Robert Lind, at ABN Amro in London, said of the euro zone data.
The parallel Japanese Reuters/Nomura/JMMA survey fell to 49.0, showing its April rise to just above 50 for the first time in eight months may have been a blip.
Japanese data also showed a drop in export orders, but to a lesser extent than in Europe because the yen has risen much less against the dollar due to repeated intervention by the government. The impact of Severe Acute Respiratory Syndrome (Sars) was cited as an additional factor for factory output decline.
As leaders of the world's major developed economies tiptoed around the dollar issue at the annual G8 summit in France, the reports revealed that down on the factory floor, the euro's strength and the yen's resilience were hurting jobs and profits.
Top European officials once again asked the ECB to respond to the export-choking currency strength and stagnant economic conditions by easing monetary policy. Currently, short-term rates in the euro zone stand at 2.5 per cent.
"With all due respect for the independence of the European Central Bank, we have made clear that there is possibly still room here to stimulate growth," said German Chancellor Gerhard Schroeder.
An ECB rate cut would narrow the differential with official US rates, widely cited for the euro's recent rise, to 0.75 point.
Other European data issued on Monday added to the grim economic picture.
The European Commission's business climate indicator fell to a 15-month low last month, economic sentiment worsened slightly and inflation across the 12-member bloc eased to 1.9 per cent from 2.1 per cent, strengthening the case for a rate cut.
Even in Britain, whose pound has been weakening against the newly mighty euro, the news was not good.
The Chartered Institute of Purchasing and Supply/Reuters' purchasing managers' index slipped to 48.1 from 48.6 in April. A decline in both new orders and export orders portended further weakness ahead.