Fragile global recovery stumbles as Europe, China falter

Monday, 25 November 2013 00:00 - - {{hitsCtrl.values.hits}}

LONDON (Reuters): The fragile global economic recovery took a step backwards this month as businesses across the euro zone and China’s vast factory sector grew at a milder pace, business surveys showed last week. While growth in Germany was resurgent, French business activity took a tumble and contracted, underlining how lopsided the euro zone’s recovery from recession is.

Patchy recoveries Patchy recoveries in developed countries meant demand for China’s manufactured goods from abroad fell to a three-month low in November, bolstering expectations that the world’s second largest economy could lose some vigour this quarter. “This is evidence to suggest the European economy is struggling to gain momentum and the Chinese numbers certainly were not great,” said Peter Dixon at Commerzbank. “There will be an okay rebound in the course of the next year but not as strong as perhaps we once thought. A lot is going to depend on how the United States holds up.” Preliminary data due later from the United States is expected to show a pickup in its manufacturing. Markit’s Eurozone Composite Purchasing Managers’ Index (PMI), which combines manufacturing and services data and is seen as a good guide to growth, slipped to 51.5 from 51.9 last month, undershooting all forecasts in a Reuters poll. It was, however, the fifth month the index has been above the 50-mark than denotes growth. Longest-ever recession The bloc’s economy is struggling to recover from its longest-ever recession, which ended this year, and Markit said the survey was consistent with growth of around 0.2% in the current quarter, in line with the latest Reuters poll of analysts on Wednesday. “In a nutshell, today’s PMI figures confirm that the euro zone economic momentum has lost some steam. The stabilisation in domestic demand remains fragile and a solid recovery seems to be some way off,” said Annalisa Piazza at Newedge Strategy. Across the Channel, Britain’s finances showed an improvement last month as stronger economic growth and a recovering housing market boosted tax revenues, although it failed to live up to even the most pessimistic forecast in a Reuters poll. Cracks in China The Chinese Flash Markit/HSBC PMI fell to 50.4 from October’s final reading of 50.9, but for a fourth consecutive month remained above the 50 line. “Today’s PMI report underpins our view that Chinese economic growth momentum may have peaked in the third quarter. Looking ahead, we also stick to our assessment that growth will slow further next year,” said Nikolaus Keis at UniCredit. A PMI index measuring new export orders fell to a three-month low of 49.4 in November from 51.3 in October, reflecting lethargic external demand. Overall new orders also edged down slightly, which could suggest that a revival in domestic demand is not strong enough to offset faltering external orders. Beijing has set an annual economic growth target of 7.5% for this year, which officials and economists have said is achievable, though the economy is firmly on track to post its slowest growth in 23 years. China’s top leadership unveiled the boldest set of economic and social reforms in nearly three decades following a four-day conclave ended last week, which are expected to give the economy fresh drivers of growth. “The optimism unleashed by China’s reform plan is today hammered by the reality of weaker economic data,” said Wei Yao at Societe Generale.