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Home / Business / Disappointing factory activity threatens global growth

Disappointing factory activity threatens global growth



LONDON / HONG KONG (Reuters) – The factory activity was in its weakest year over much of the world in January, raising concerns about trade prices, political uncertainty and cooling demand posing a growing threat to global growth.

FILE PHOTO: Workers working on dismantling equipment and facilities are seen through a window at a former steel factory in Jigang, in Jinan, Shandong Province, China on December 27, 2018. REUTERS / Stringer

Weak Purchaser Index (PMI) readings reinforce expectations central banks will add further interest rate hikes this year and fuel expectations a global economic downturn is underway, as highlighted in a Reuters survey last month.

Trade-focused Asia seems to be the most visible loss of momentum to date, with activity shrinking in China, although European economies are stuck in low gear and many emerging markets sputtering.

The Euronson has been rocked by protests in France, a car sector struggling to regain momentum, political strife and increasing trade protection.

The production growth in the block was minimal last year, with four years low, and forward-looking indicators suggest that there will soon be no turnovers. [EUR/PMIM]

Germany's industrial sector contracted for the first time in more than four years as Europe's power plants were hit by trade tensions, even though activity in France was left behind, helped by job growth.

British factories are encrypting to store goods at the fastest pace since the records began in the early 1990s, as they brace for a potentially chaotic Brexit in less than two months. Nevertheless, growth was weaker than expected, and optimism declined. [GB/PMIM]

Last week, the International Monetary Fund reduced its world growth forecasts this year and next, and the lack of solution to protectionism could further destabilize the slow global economy.

"Unfortunately, the situation still seems to be getting worse first. We need to brace ourselves for a continuous rigorous economic data driven by, but not limited to, much weaker global trade," said Holger Schmieding, CFO of Berenberg. [19659004] On Wednesday, the US Federal Reserve sent its three-year drive to tighten monetary policy may end up with a sudden cloudy view of the US economy.

In some countries, there is even talk of potential price fluctuations.

Beijing is under pressure to come up with several stimulus measures and find common ground with the United States to prevent their trade war from escalating.

US President Donald Trump said on Thursday that he will meet Chinese President Xi Jinping soon to seal a comprehensive trade deal such as Trump and his top-selling dealer both quoted significant advances in two days of high-level conversations.

Trump, who spoke at the White House during a meeting tea with Chinese vice president Liu He said he was optimistic, the world's two largest economies could now "the biggest deal ever made".

"Much depends on whether the US and China come to a reasonable deal. Then we can actually stave off this potential trading recession, but at the moment it's all cautious," says Irene Cheung, Asia strategist at ANZ.

Global shares plunged down from the highest levels in two months on Friday after the weak data erased a wet blanket on a rally that took them to their best January on record

LETTER

China's factory activity shrunk most of nearly three years in January, when new orders were further reduced and production declined, the private Caixin / Markit PMI survey showed, lower than Thursday's official PMI survey, but both suggested that the economy continue to slow.

Veteran China observers recommend However, usually taking the data early in the year with a pinch of salt, suspects the trends may be distorted at the time of the Lunar New Year holiday.

closes for long periods around the holiday, starting February 4 this year. Nevertheless, workers, business owners and labor activists have told Reuters companies to turn off earlier than usual as trading war bites, with some likelihood of closing for good.

Spread beyond production, the global impact of China's downturn means that cost-conscious Chinese tourists will choose destinations closer to home for the week, rather than more expensive trips further afield.

"The global outlook is a bit more exposed to China today than it was, for example, two or three years ago," said Sonal Desai, chief executive officer at Franklin Templeton Fixed Income.

Japan's factory activity was the slowest for 29 months, with weakening exports and production suggesting that it could soon fall into contraction. Manufacturers in the world's No. 3 economy face both falling exports and a likely decline in domestic demand when the country's turnover tax is raised in October.

Shipping prices for dry bulk and container ships, carriers of most of the world's raw materials and finished goods, have declined over the past six months.

But not all PMI surveys were gloomy. In India, which depends more on domestic demand, factory activity accelerated. And it was still in a moderate expansion area in Vietnam, the Philippines and Thailand.

(Asia Policy Rates: tmsnrt.rs/1U5hc2W_

(Graphic: China's economic trends – tmsnrtrsrsii9Q6a)

(Graphic: Sizes among 200 billion dollars of Chinese goods hit by US rates) – tmsnrt.rs/2HGBgfj )

(Graphic: Larger goods among $ 16 billion of Chinese goods hit by US tariffs (Aug) – tmsnrt.rs/2HFiipx

(Graphic: Major items among $ 34 billion of Chinese goods hit by US rates (July ) – tmsnrtrsrs / 2HG2Rxj)

Editing by Kim Coghill and Janet Lawrence

Our Standards: Thomson Reuters Trust Principles.

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