Chinese, U.S. factories struggle, Europe still in slump

Thu Jun 20, 2013 12:15pm EDT
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By Jonathan Cable and Steven C. Johnson

LONDON/NEW YORK (Reuters) - Factory output in China weakened to a nine-month low in June while U.S. manufacturing closed out its worst quarter in the last four, suggesting the road to recovery for the world economy remained an uneven one.

A day earlier, the Federal Reserve said the U.S. economy was expanding strongly enough for the central bank to begin slowing the pace of its stimulative bond purchases later this year.

Other major economies are lagging America's, however, which could limit the strength of global growth. China, the world's second largest economy, grew at its slowest pace in 13 years in 2012 and incoming data this year has been weaker than expected.

That's evident in the country's large manufacturing sector, which, according to the flash HSBC Purchasing Managers Index, contracted again in June as demand fell.

"A slowdown in the Chinese economy doesn't help the outlook for the U.S. particularly, but American growth isn't entirely dependent on what happens in China," said Philip Shaw, chief economist at Investec.

U.S. growth picked up in the first three months of the year, boosted partly by a recovering housing market, though the pace is expected to drop off in the second quarter.

Manufacturing in particular has struggled. According to information service Markit's latest survey, the second quarter was the worst for the sector in the last four as the pace of hiring and overseas demand weakened.

"Companies are certainly circumspect about any sustained revival of demand," said Markit chief economist Chris Williamson, who added that employment was also being suppressed by "the need to boost productivity, especially with intensifying competition from overseas and in export markets."   Continued...

An investor looks back in front of an electronic board showing stock information filled with green-coloured figures, which indicate falling prices, at a brokerage house in Fuyang, Anhui province June 20, 2013. REUTERS/China Daily