World economic recovery struggling to gain traction

Thu Feb 20, 2014 7:24am EST
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By Jonathan Cable and Adam Rose

LONDON/BEIJING (Reuters) - China's vast factory sector contracted again this month and the expected acceleration in euro zone business activity failed to materialize, highlighting the fragile state of a global economy.

A survey out of China reinforced concerns of a minor slowdown in the world's second biggest economy while a sister index underscored an ongoing divergence between France, the bloc's second biggest economy, and the rest of the 18-member currency union.

"The euro zone is most at risk of a global demand shock given the chills emanating from China's deleveraging across emerging markets, North America's current 'frozen' growth patch and the fact that the U.S. is exporting less of its growth to the rest of the world," said Lena Komileva at G+ Economics.

Figures due later on Thursday from the United States are expected to show a marked easing of the pace of growth in its manufacturing industry.

The flash Chinese Markit/HSBC PMI fell to a seven-month low of 48.3 in February from January's 49.5, although some analysts cautioned against reading too much into the report, noting it was a shorter-than-usual snapshot.

Anything below 50 indicates a contraction.

"Today's poor PMI numbers add to the raft of survey and activity data showing that growth momentum in China is clearly slowing after having peaked last summer," said Nikolaus Keis at UniCredit.

"However, one should not read too much into a single number that may have been additionally depressed by the Lunar New Year holidays."   Continued...

An employee works at a steel factory that exports to Europe and America in Jiaxing, Zhejiang province, February 28, 2013. REUTERS/William Hong