Evaporating inflation and growth put pressure on central banks

Fri Jan 23, 2015 6:39am EST
 
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By Jonathan Cable and Koh Gui Qing

LONDON/BEIJING (Reuters) - Businesses across Asia and Europe have slashed prices at the start of the year to drum up trade, surveys showed on Friday, a day after the European Central Bank voted to print money in a bid to revive inflation.

Euro zone firms cut prices at the fastest rate in nearly five years and Chinese factories cut them for the sixth straight month, while economic growth in South Korea slowed sharply, raising the prospect of more easing from central banks in Asia.

The ECB took the policy plunge on Thursday, announcing a government bond-buying programme which will pump hundreds of billions of euros in new money into a sagging euro zone economy.

With Chinese factory growth stalling for a second month, expectations are high that Beijing will announce fresh stimulus measures soon.

"2015 is unlikely to be a particularly fantastic year with regards to global growth," said Peter Dixon, an economist at Commerzbank.

"There is no doubt that across the world central banks are being a little bit more aggressive. Disinflation has certainly changed the monetary prospects."

Markit's Eurozone Composite Flash Purchasing Managers' Index (PMI), based on surveys of thousands of companies and seen as a good growth indicator, bounced to a five-month high of 52.2 from December's 51.4.

That beat the median forecast of 51.8 and marked the 19th month above the 50 line denoting growth.   Continued...

 
Workers install the chassis along a production line at a truck factory of Anhui Jianghuai Automobile Co. Ltd (JAC Motors) in Hefei, Anhui province May 5, 2014. REUTERS/Stringer