Weak demand hits factory activity across Asia, Europe

Wed Oct 1, 2014 11:46am EDT
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By Sumanta Dey and Wayne Cole

BANGALORE/LONDON/NEW YORK (Reuters) - Dwindling demand hurt factory activity across much of Asia and Europe in September, and mixed manufacturing indicators in the Americas on Wednesday raised the chances of slower global economic growth in the months ahead.

China's manufacturing sector barely expanded, while Britain's slumped, and the drop in new orders did not even spare Germany, the strongest member of the euro zone currency bloc, or France, its No. 2 economy.

Euro zone factories' final September purchasing managers' index from private data vendor Markit was 50.3, down from 50.7 in August, and its lowest reading since July last year, as new orders contracted for the first time in more than a year.

"It is very hard to put any positive spin on the September PMI survey and contracting new orders do not bode well for manufacturing output in the fourth quarter," said IHS Global Insight economist, Howard Archer.

While the European Central Bank (ECB) is unlikely to move interest rates at its meeting Thursday in the wake of slow eurozone economic growth, President Mario Draghi is expected to announce details of the ECB's asset-backed securities purchase program.

But the clamor is growing louder for the bank to conduct full-blown quantitative easing (QE), involving buying sovereign bonds - as Britain, Japan and the United States have done - to thwart risks of deflation and revive growth.

Economists gave a 40-percent probability of such a move in a Reuters poll last week. [ECB/INT]

"We suspect that there is still appreciable reluctance within the ECB's Governing Council to engage in full blown QE, so it will only occur if the euro zone returns to recession and consumer price inflation trends down further," Archer said.   Continued...

Workers look at machines moving newly made raw bricks at a factory in Huaibei, Anhui province July 31, 2014. REUTERS/China Daily