Struggling factories underline fragility of world growth

Thu May 2, 2013 6:39am EDT
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By Jonathan Cable and Langi Chiang

LONDON/BEIJING (Reuters) - Manufacturing across the world stumbled last month, underlining the fragility of the global economy and building the case for more action from leading central banks.

Gloomy purchasing managers indexes - surveys of factory activity that correlate strongly with economic activity - added to a string of other economic data that has already soured optimism that a budding pickup in the world economy will flower.

Over the past two days, manufacturing indexes for the United States, euro zone - including powerhouse Germany - and China have all declined. Britain's improved but was still signaling contraction.

"There is not a great amount of positive news out there. Globally, we do see a weaker second quarter - there are no arguments about that," said Victoria Clarke, economist at Investec.

A survey on Wednesday pointed to a slowdown in the United States, which was soon followed by a signal from the Federal Reserve signal that it would step up its asset purchase program if necessary.

Until recently, analysts had expected the Fed to buy a total of $1 trillion in securities during its ongoing third round of quantitative easing with expectations it would start to take its foot off the accelerator in the second half of this year.

In the euro zone, manufacturing output declined again in April as factory activity in Germany, Europe's largest economy and the world's second-biggest exporter after China, fell for the second month and at a faster pace than in March.

Manufacturers in France, Italy and Spain - the euro zone's next biggest economies after Germany - all reported contraction in business.   Continued...