Global factories struggle as stimulus fails to spur

Mon Nov 2, 2015 7:06am EST
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By Jonathan Cable and Wayne Cole

LONDON/SYDNEY (Reuters) - Massive monetary stimulus from Chinese and European central banks has done little to spur factory growth, moving a debate over more easing up the agenda and raising doubts over whether U.S. interest rates will rise this year.

A crop of industry surveys out on Monday pointed to October as another subdued month. Activity in China's colossal factory sector shrank as global demand stuttered while euro zone factories again resorted to slashing prices to drum up trade.

"We do think there is more easing to come in China. They are in the midst of a long-running easing cycle that is probably going to go on until late next year," said Andrew Kenningham at Capital Economics.

"The ECB is likely to announce something further in December. The concerns there are not so much about growth but about the prospects for inflation."

More than half a year after the ECB started pumping in 60 billion euros a month of new money through its quantitative easing program, the currency bloc's relatively downbeat manufacturing survey may make disappointing reading for policymakers.

The central bank has failed to lift inflation anywhere near its target of just below 2 percent, and data on Friday showed prices were unchanged last month, heaping more pressure on the bank to act.

It was already almost certain the ECB would ease monetary policy in December, increasing or extending its stimulus program and further cutting the deposit rate, a Reuters poll of economists taken ahead of the inflation data found. [ECB/INT]

Beijing has also rolled out a raft of support steps to avert a sharper slowdown, including cutting interest rates six times in the past year, but the stimulus has been slower to take effect than in the past.   Continued...

An employee operates a machine as she works along a production line of a factory producing solar energy products in Shangrao, Jiangxi province, China, October 11, 2015. REUTERS/China Daily