China’s manufacturing stalls; eurozone gearing up for rebound

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China’s manufacturing stalls; eurozone gearing up for rebound

But the threat of deflation in the region was highlighted by surveyed firms’ increasing willingness to cut prices to attract customers.

By (Reuters)

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Published: Tue 25 Mar 2014, 9:59 AM

Last updated: Fri 3 Apr 2015, 5:56 PM

China’s huge manufacturing engine stuttered in the early part of 2014 while a return to growth in French business activity this month suggested a solid, broad-based recovery was taking shape in the eurozone, surveys showed.

The transport barge Tossa on the Rhine river in Dusseldorf. The eurozone posted solid expansion in its manufacturing and services industries during March. — Bloomberg

Weaker-than-expected readings from China pointed to a contraction in the first three months of the year and will raise market expectations of government stimulus to arrest a loss of momentum in the world’s second-largest economy.

“It tells you something about the extent to which market concerns about a slowdown in China are justified,” said Peter Dixon at Commerzbank. “In the eurozone, the economy is bowling along at a reasonable pace.”

A solid expansion in both the eurozone’s manufacturing and services industries in March, and growth in its second-biggest economy France, meant the bloc’s recovery pace barely slowed from February’s 2-1/2-year high.

But the threat of deflation in the region was highlighted by surveyed firms’ increasing willingness to cut prices to attract customers.

China’s flash Markit/HSBC Purchasing Managers’ Index fell to an eight-month low of 48.1 in March from February’s final reading of 48.5. The index has been below 50 since January, indicating a contraction in the sector this year. Output and new orders both weakened but new export orders grew for the first time in four months, the survey showed, suggesting the slowdown has been driven primarily by weak domestic demand. The eurozone’s composite PMI, which is seen as a good growth indicator, edged down to 53.2 from February’s 32-month high but Markit said it indicated a 0.5 per cent economic expansion this quarter, stronger than the 0.3 per cent predicted in a recent Reuters poll.

US factory activity inches up

Meanwhile, US manufacturing activity slowed in March after nearing a four-year high last month, but the rate of growth and the pace of hiring remained strong, an industry report showed on Monday.

Financial data firm Markit said its “flash” or preliminary US Manufacturing Purchasing Managers Index slipped to 55.5 from 57.1 in February. Readings above 50 indicate expansion. That fell short of economists’ expected reading of 56.5 but was still comfortably ahead of 53.7 in January, suggesting the effects of a harsh winter have started to fade.


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