Global manufacturing weakens

US manufacturing suffered its weakest quarter in three years and conditions at European businesses worsened, surveys showed on Thursday, while China’s economy continued to lose momentum.

The data shed more light on the difficult task facing global policymakers, particularly in Europe and the United States, who have tried to boost economic growth with aggressive monetary stimulus.

There was little indication that the European Central Bank’s plan announced earlier this month to buy the government bonds of troubled eurozone states has boosted confidence among service sector firms.

Financial information firm Markit said its US “flash”, or preliminary, manufacturing Purchasing Managers Index stood at 51.5 in September, unchanged from August. A reading above 50 indicates expansion.

The index averaged 51.5 in the third quarter, below the 54.2 registered between April and June, for its worst showing since the third quarter of 2009. At 51.2, the output component was the lowest since September 2009. “The global situation is a restraint on the US economy,” said David Sloan, economist at 4Cast Ltd in New York. “Certainly, there is not going to be much growth in Europe. Growth in Asia, and China in particular, is slowing down, so US growth is going to have to be domestically generated.”

Export orders at US factories fell for a fourth month running, with September’s fall the steepest in nearly a year. The Federal Reserve last week said it will hold interest rates at zero until mid-2015 and would buy mortgage-backed bonds monthly until the job market improves substantially.

In the eurozone, Markit’s composite eurozone purchasing managers index fell to 45.9 in September from 46.3, and Markit said it suggested the eurozone economy could shrink by roughly 0.6 per cent in the third quarter ending this month.

Export-driven Asian economies struggled again in September. The China HSBC manufacturing PMI inched up in September to 47.8 from August’s nine-month low of 47.6, suggesting the world’s second-largest economy remains on track for a seventh quarter of slowing annual growth. China’s economic slowdown is expected to reach its nadir this quarter, with a recovery of momentum delayed until the final quarter, leaving growth for 2012 likely to fall below eight per cent, a level last seen in 1999, a Reuters poll showed last week.

European Union and Chinese leaders are meeting in Brussels on Thursday leaders to try to bridge growing differences over trade and find common ground on tackling Europe’s debt crisis.

In Europe, manufacturers performed slightly better than economists had hoped. The downturn in Germany, the 17-country eurozone’s biggest economy, also eased a bit this month, though the troubles for both French factories and service firms increased at a faster rate than expected.

Germany’s PMIs beat even the cheeriest prediction from a sample of nearly 30 economists, though many advised caution.

“Whether or not that will last is the big question. We’re not altogether hopeful about that,” said Chris Williamson, chief economist at PMI compiler Markit.

The surveys backed the growing view that the ECB will cut its main interest rate at its next meeting in October, to a new record low 0.5 per cent from 0.75 per cent currently.

In Britain, which is suffering its own economic slump, retail sales ticked down in August driven by a slump in online sales as Britons watched the Olympics on television, data showed on Thursday.