Factory output in China, the world’s second largest economy, weakened to a nine-month low in June, combining with a continued recession in the eurozone to threaten a global recovery led by the US.
A day after the Federal Reserve suggested the US economy was firmly on a recovery path – enough so to withdraw some monetary stimulus – data showed China’s economy was stuttering.
Faltering demand pushed the flash China HSBC Purchasing Managers Index (PMI) down to 48.3 in June from 49.2, increasing pressure on the People’s Bank of China to loosen the monetary reins.
Meanwhile, Markit’s Flash Eurozone Composite PMI, which makes up around 85 per cent of the final reading and is seen as a reliable economic growth indicator for the bloc, remained below the dividing line between growth and contraction. It did, however, rise to 48.9 in June from May’s 47.7, suggesting the decay has eased across the 17-nation bloc.
China’s economy grew at its slowest pace for 13 years in 2012 and data so far this year has been weaker than forecast, bringing warnings the country could miss its 7.5 per cent growth target, though possibly not by much. It stands in contrast with US data, which has been generally positive.
Fed chairman Ben Bernanke sent financial markets reeling on Wednesday when he said the US economy is expanding strongly enough for the central bank to begin slowing the pace of its bond-buying programme later this year.
“There’s a way to go – a slowdown in the Chinese economy doesn’t help the outlook for the US particularly, but American growth isn’t entirely dependent on what happens in China,” said Philip Shaw, chief economist at Investec. “The eurozone flash PMIs are encouraging, they are consistent with the view that we will see a stabilisation over the next few months.”
The eurozone PMI was at its highest since March 2012, and beat forecasts in a Reuters poll of 23 economists for a more modest upturn to 48.1. But the index has been below the 50-mark dividing growth from contraction for all apart from one of the last 22 months. (Reuters)