LONDON/BEIJING: Major economies in Asia and Europe finished the first quarter on a weaker note, with key manufacturing surveys fuelling expectations policymakers may be forced to act in coming months to prop up faltering growth.
Factories across Europe eased back on the throttle in March while China’s vast manufacturing industry contracted for the third month, surveys showed, although a similar poll due later from the United States is expected to show a pick-up.
“The PMIs have given a steer on the Chinese economy for a while and it is looking like the People’s Bank of China will take some action,” said Philip Shaw at Investec. “In the euro area they are tending to confirm that the recovery is taking place gradually, but that there is a broadening of the recovery.”
Output again rose across the board in the eurozone, suggesting its recovery is becoming entrenched, but Markit’s Purchasing Managers’ Index (PMI) also revealed that factories were once more cutting prices.
The bloc’s final manufacturing PMI came in at 53, matching an earlier flash reading but below February’s 53.2, while the output price sub-index dropped below the 50 mark that separates growth from contraction for the first time since August. Eurozone inflation fell to just 0.5 percent last month, its lowest since November 2009 and well below the European Central Bank’s target of just below 2 percent.
The ECB is expected to keep monetary policy unchanged despite calls for it to act to support growth. Olli Rehn, the EU’s top economic official, added to that pressure yesterday, saying prolonged low inflation would make it harder to correct imbalances in the eurozone. Unemployment in the bloc declined slightly in February, although it remained at 11.9 percent, the European statistics office Eurostat said yesterday.
Growth in British manufacturing unexpectedly eased to its slowest pace in eight months and prices paid by factories tumbled, giving the Bank of England scant reason to adjust its loose policy stance.
In China, the final Markit/HSBC PMI gauge of factory activity fell to an eight-month low of 48 in March. It has remained below the 50 level since January. The official survey, which is geared towards bigger, state-owned firms, showed a marginal increase to 50.3 from 50.2. But economists warned that given seasonal patterns this was a sign of further weakness rather than improvement in the world’s second-biggest economy.Reuters
