Sluggish factory growth puts central bank stimulus in spotlight

Mon Jun 1, 2015 11:46am EDT
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By Jonathan Cable

LONDON (Reuters) - Manufacturing activity showed few signs of picking up across Europe, Asia or the Americas in May as demand stayed stubbornly weak, highlighting the need for central banks to continue supporting economic growth.

The gloomy business surveys come a little less than three months after the European Central Bank embarked on a 1-trillion-euro stimulus programme, and will likely fuel expectations its counterpart in Beijing will have to roll out more aggressive policy measures.

Euro zone factory growth was weaker than previously thought last month, while Chinese factory activity barely accelerated, and U.S. manufacturing activity growth slowed.

A measure of global manufacturing growth showed activity accelerated slightly last month but remained weak as firms around the world focused on existing orders.

"Across the euro zone as a whole it is plodding along. We can probably do with a little bit more strength out of Germany and France," said Peter Dixon at Commerzbank.

"We are going to have to live with rather slower growth in China. We have seen some modest monetary easing and I expect that will continue."

The May final manufacturing purchasing manager's index (PMI) from private data vendor Markit for the euro zone was 52.2, below a preliminary reading of 52.3 and just ahead of April's 52.0.

Worryingly for the ECB, the region's top two economies struggled. German factory growth slowed to a three-month low and French manufacturing activity, though improving, still contracted.   Continued...

An employee works on the automobile assembly line of a Renault Clio IV at the Renault automobile factory in Flins, west of Paris, France, May 5, 2015. REUTERS/Benoit Tessier