Tags: Eurozone | Factory | Asia | Economy

Eurozone Factory Slump Eases as Asia's Momentum Slides

Monday, 03 June 2013 08:16 AM

Eurozone manufacturing contracted again last month, although at a slightly slower pace, while Asian factories lost momentum, underlining the somber prospects for the world economy in the second quarter.

Figures expected later on Monday from the United States are expected to do little to lift the gloom as the U.S. Institute for Supply Management (ISM) is expected report a slight fall in its main index.

Markit's Purchasing Managers' Indexes for Asia and Europe provided early grim reading.
"The global economy remains weak... There's nothing in the system at the moment, certainly in China, that suggests there is a big pick-up in store just around the corner," said Victoria Clarke at Investec.

The HSBC China PMI fell in May to 49.2, the lowest level since October 2012 and down from April's 50.4. A reading below 50 suggests a contraction in activity from the previous month, while a reading above that level points to expansion.

For the eurozone, Markit's PMI rose to 48.3 from April's 46.7 but spent its 22nd month below the watershed 50 level that marks contraction.

Still, it was its highest since February 2012 and the first time the downturn has eased in four months.

The PMI for Germany, Europe's largest economy, remained sub-50 but did improve and it was a similar story in neighboring France, the bloc's second biggest economy. Spanish and Italy's PMIs behaved similarly.

British manufacturing, however, expanded at its fastest pace in over a year last month, boosting optimism that the country's recovery is becoming more broad based.

An upward revision to April meant British factories have now expanded for two straight months.


Growth in Indian factories was close to stalling, with the HSBC PMI slipping to its lowest reading since March 2009, although the index has stayed above 50 for over four years.

However, a factory production sub-index for Asia's third largest economy showed output was falling for the first time in more than four years as new orders growth slowed to a trickle.

The China survey showed total new orders and new export orders fell in May from April, highlighting weakness in both domestic and overseas demand.

China's HSBC PMI followed a similar government survey released on Saturday, which showed a slight uptick but also pointed to falling orders from exports markets.

The data, plus a fall in the official services PMI, added to evidence that the world's second-largest economy is losing further momentum in the second quarter.

"We think China's economic growth will probably continue to slide," said Zhiwei Zhang, chief China economist at Nomura in Hong Kong.

New export orders also fell in Taiwan, a key producer in the global technology supply chain, while in South Korea, home to big brand names such as Samsung and Hyundai, new export orders growth eased to its weakest pace since January.

"A number of respondents blamed the reduction in demand to a general slowdown in global activity," HSBC said Taiwan.

European firms cut prices for the second month in May — the output price index fell to its lowest since January 2010 — but that still failed to push a new orders index above the breakeven mark, suggesting this month's PMI will see scant improvement.

With the bloc enduring its longest recession the European Central Bank has come under growing pressure to take more action to help bring a quicker end to the downturn.

ECB President Mario Draghi has said the central bank was ready to cut interest rates again if the bloc's economy deteriorates further but a Reuters poll taken last week did not forecast any more policy easing.

© 2021 Thomson/Reuters. All rights reserved.

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Eurozone manufacturing contracted again last month, although at a slightly slower pace, while Asian factories lost momentum, underlining the somber prospects for the world economy in the second quarter.
Monday, 03 June 2013 08:16 AM
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