Euro zone, U.S. bounce back but China stalls

Wed Jul 24, 2013 11:20am EDT
 
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By Jonathan Cable and Steven C. Johnson

LONDON/NEW YORK (Reuters) - Private industry in the euro zone expanded for the first time in more than a year in July, which was also a good month for U.S. factories, but the massive manufacturing engine that powers China continued to lose steam, surveys showed on Wednesday.

The jump in Markit's "flash" Eurozone Composite PMI to 50.4, which marked the first expansion since January, 2012, should hearten European Central Bank policymakers who have promised to do whatever it takes to pull the 17-country euro zone out of the longest recession in the bloc's history.

But data showing China's factories lost momentum again this month dulled the good news in Europe and boded ill for companies exposed to the world's second largest economy. Chinese growth has slowed in nine of the past 10 quarters.

Knock-on effects are already being felt widely. Japanese export growth has slowed despite a weaker yen while Apple (AAPL.O: Quote) has lamented a drop in Chinese demand for its products.

"China's slowdown is starting to become more dangerous," said Yasuo Yamamoto, a senior economist at Mizuho Research Institute in Tokyo.

China's overall PMI of business conditions fell to 47.7 from June's final reading of 48.2, its weakest since August 2012 and its third straight month below 50, which marks expansion. The employment sub-index slid to 47.3, the weakest since the depths of the global financial crisis in early 2009.

"This print could reignite fears of a Chinese hard landing," said Annette Beacher, head of Asia-Pacific research at TD Securities in Singapore. "We expect economic growth to continue moderating towards 7 percent."

REBOUND IN U.S., GLIMMER OF HOPE IN EUROPE   Continued...

 
People take a escalator at the financial district of Pudong in Shanghai July 23, 2013. REUTERS/Carlos Barria