China, Europe and U.S. business activity disappoints in April

Thu Apr 23, 2015 11:11am EDT
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By Ross Finley and Ian Chua

LONDON/SYDNEY/NEW YORK (Reuters) - Business activity weakened in China and Japan in April and growth slowed in Europe and the U.S., suggesting the global economy may be less robust than policymakers are predicting.

In China, where the government has been engineering a rebalancing of its economy towards domestic spending and away from reliance on exports of manufactured goods, the preliminary purchasing managers' index (PMI) fell to a one-year low of 49.2 from 49.6, according to data from HSBC/Markit. Economists polled by Reuters had expected it to remain steady.

An index reading below 50 suggests contraction in the sector.

Analysts at Japanese bank Nomura said the Chinese data underscored their forecast for two more 50 basis point cuts in the reserve requirement ratio for Chinese banks, and three more 25 basis point interest rate cuts this year.

The People's Bank of China cut its requirement for the amount of cash banks must hold as reserves by a full percentage point on Sunday.

Hopes of yet more stimulus have helped sparked a massive rally in the Chinese share market. The CSI300 index .CSI300 of the largest listed companies in Shanghai and Shenzhen has risen over 30 percent so far this year.

The Markit/JMMA preliminary Japan PMI for April also slid, to 49.7 from 50.3, as new orders continued to shrink and manufacturing production fell for the first time since July 2014. The data showed an increase factory hiring, however.

At next week's policy review, the Bank of Japan is expected to hold off on expanding its already massive monetary stimulus but may lower its inflation forecasts.   Continued...

Workers use remote controls to check 32-inch television sets before they are repackaged at Element Electronics in Winnsboro, South Carolina May 29, 2014. REUTERS/Chris Keane