Fed officials favor QE3; Asian data signal drop in global demand

Mon Jul 9, 2012 8:24am EDT
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By Nick Edwards and Leika Kihara

BEIJING/TOKYO (Reuters) - Asia's biggest exporters showed further signs of slowing down in data published on Monday, signaling a fresh slide in global demand, as two top U.S. Federal Reserve officials said they favored easing monetary policy to boost growth.

Japan's core machinery orders in May plunged 14.8 percent from April, with the key gauge of capital spending sinking far below analyst expectations of a 3.3 percent decline. That raised the risk that growth momentum in the world's No. 3 economy will stall if firms start to scale back investment.

Meanwhile consumer inflation in China, the world's second biggest economy, eased more than expected in June, with producer prices in outright deflation for a fourth month.

The numbers signal that demand for goods from the nation's vast factory sector - especially from foreign customers - is declining as the global economy weakens.

Exports from Taiwan, one of the world's largest producers of electronics, declined in annual terms for a fourth straight month in June against market expectations of a modest rise. Taiwanese firms make the majority of Apple gadgets as well as smartphones for various brands, and the dip reflects falling global demand for such consumer products.

Europe's biggest economy, Germany, announced that imports and exports rose more in May than expected, but economists said it was a rebound from weak figures in April.

The data points in Asia underlined a downbeat assessment of growth prospects in the world's biggest economy by Boston Federal Reserve President Eric Rosengren in a speech in the Thai capital Bangkok on Monday.

"My pessimism is rooted in an expectation of weakness in investment, net exports, and government spending," including "concerns about economic and financial conditions in Europe," said Rosengren, who described himself as more pessimistic than policy-setting colleagues on the Federal Open Market Committee (FOMC).   Continued...

A truck is driven down a road at a yard where cars are parked before being exported at a port in Incheon, west of Seoul June 17, 2012. REUTERS/Choi Dae-woong