04-10-2011, 08:01 AM
The Straits Times
Oct 4, 2011
Slump in factory output fuels fears
Spectre of another global recession looms as orders fall across euro zone, Asia
LONDON: Factories in the euro zone and Asia endured another tough month last month, as demand shrank, reinforcing fears that fading growth in the United States and Europe could spark another worldwide recession.
The 17-nation euro zone's manufacturing contraction deepened last month, as new orders shrank at their fastest pace since June 2009, a business survey showed yesterday.
Factory activity in some of Asia's biggest economies, meanwhile, slumped to levels not seen since the depths of a financial crisis more than two years ago.
There are signs, however, that the US manufacturing sector is in better health than previously thought. The Institute for Supply Management said its index of factory activity in the US rose to a better- than-expected 51.6 last month from 50.6 in August. A reading above 50 indicates an expansion.
While Europe's leaders have so far managed to prevent the euro zone's sprawling debt crisis from triggering a financial catastrophe, Markit's Eurozone Manufacturing Purchasing Managers' Index (PMI) pointed to worsening economic fortunes across the bloc.
The index, which gauged changes in the activity of thousands of factories in the euro zone, fell to a final reading of 48.5 last month from 49 in August. It was revised up slightly from a preliminary reading of 48.4. That represented the second consecutive month the manufacturing PMI fell below the 50 mark, with new orders plunging at a rate not seen since June two years ago.
Surveys released earlier yesterday showed factory output in Spain, an economy sagging under the weight of harsh austerity measures like much of the euro zone periphery, deteriorating at the fastest pace in more than two years.
French manufacturers saw activity decline for the second month in a row. Even in Germany, the biggest and arguably the most prosperous economy in the bloc, manufacturing growth effectively came to a standstill.
Switzerland's PMI - at 48.2 - slipped out of the growth zone for the first time in more than two years.
The one bright spot in Europe was Britain, where the manufacturing activity index unexpectedly grew for the first time in three months.
Yesterday's report added 'to steadily mounting concerns that the euro zone could be heading back into a recession', said Mr Howard Archer, chief European economist at IHS Global Insight.
Manufacturing growth in India, meanwhile, nearly stalled last month, turning in its weakest showing since March 2009 on slowing output and order growth, as 11/2 years of interest rate increases and weakening global conditions took a toll on Asia's third-largest economy.
Taiwan's PMI stayed below the 50 line for the fourth consecutive month. New orders contracted for a third straight month, with both domestic and overseas demand weakening in a sector that was closely watched because many of the island's technology firms made up integral parts of global supply chains.
Even in China, which reported a slight uptick in its official PMI last Saturday, economists saw evidence of a cool-down. China's factory activity typically rose last month, as businesses prepared for the Golden Week holiday, but this year's increase was smaller than the average.
Singapore is scheduled to release its factory activity index today.
Asia's export orders have been falling steadily since mid-summer. So far, the data pointed to a moderate slowdown in China and other Asian economies, but another recession in the US or Europe would change the equation.
'A recession in the global economy could cause a China hard landing,' Barclays Capital economists wrote in a note to clients, adding that this was not their baseline forecast.
In Japan, a similar report last Friday showed that the manufacturing sector contracted last month for the first time in five months, suggesting that its economy was back in the doldrums after a short-lived earthquake-recovery boost.
If there is a silver lining for Asia, it is that slowing growth has helped to cool inflation, which remains well above target in countries such as China and India.
REUTERS, ASSOCIATED PRESS, BLOOMBERG
Oct 4, 2011
Slump in factory output fuels fears
Spectre of another global recession looms as orders fall across euro zone, Asia
LONDON: Factories in the euro zone and Asia endured another tough month last month, as demand shrank, reinforcing fears that fading growth in the United States and Europe could spark another worldwide recession.
The 17-nation euro zone's manufacturing contraction deepened last month, as new orders shrank at their fastest pace since June 2009, a business survey showed yesterday.
Factory activity in some of Asia's biggest economies, meanwhile, slumped to levels not seen since the depths of a financial crisis more than two years ago.
There are signs, however, that the US manufacturing sector is in better health than previously thought. The Institute for Supply Management said its index of factory activity in the US rose to a better- than-expected 51.6 last month from 50.6 in August. A reading above 50 indicates an expansion.
While Europe's leaders have so far managed to prevent the euro zone's sprawling debt crisis from triggering a financial catastrophe, Markit's Eurozone Manufacturing Purchasing Managers' Index (PMI) pointed to worsening economic fortunes across the bloc.
The index, which gauged changes in the activity of thousands of factories in the euro zone, fell to a final reading of 48.5 last month from 49 in August. It was revised up slightly from a preliminary reading of 48.4. That represented the second consecutive month the manufacturing PMI fell below the 50 mark, with new orders plunging at a rate not seen since June two years ago.
Surveys released earlier yesterday showed factory output in Spain, an economy sagging under the weight of harsh austerity measures like much of the euro zone periphery, deteriorating at the fastest pace in more than two years.
French manufacturers saw activity decline for the second month in a row. Even in Germany, the biggest and arguably the most prosperous economy in the bloc, manufacturing growth effectively came to a standstill.
Switzerland's PMI - at 48.2 - slipped out of the growth zone for the first time in more than two years.
The one bright spot in Europe was Britain, where the manufacturing activity index unexpectedly grew for the first time in three months.
Yesterday's report added 'to steadily mounting concerns that the euro zone could be heading back into a recession', said Mr Howard Archer, chief European economist at IHS Global Insight.
Manufacturing growth in India, meanwhile, nearly stalled last month, turning in its weakest showing since March 2009 on slowing output and order growth, as 11/2 years of interest rate increases and weakening global conditions took a toll on Asia's third-largest economy.
Taiwan's PMI stayed below the 50 line for the fourth consecutive month. New orders contracted for a third straight month, with both domestic and overseas demand weakening in a sector that was closely watched because many of the island's technology firms made up integral parts of global supply chains.
Even in China, which reported a slight uptick in its official PMI last Saturday, economists saw evidence of a cool-down. China's factory activity typically rose last month, as businesses prepared for the Golden Week holiday, but this year's increase was smaller than the average.
Singapore is scheduled to release its factory activity index today.
Asia's export orders have been falling steadily since mid-summer. So far, the data pointed to a moderate slowdown in China and other Asian economies, but another recession in the US or Europe would change the equation.
'A recession in the global economy could cause a China hard landing,' Barclays Capital economists wrote in a note to clients, adding that this was not their baseline forecast.
In Japan, a similar report last Friday showed that the manufacturing sector contracted last month for the first time in five months, suggesting that its economy was back in the doldrums after a short-lived earthquake-recovery boost.
If there is a silver lining for Asia, it is that slowing growth has helped to cool inflation, which remains well above target in countries such as China and India.
REUTERS, ASSOCIATED PRESS, BLOOMBERG