Slowdown worsens as China cools,Europe sinks

Some of the world’s major economies are faltering or shrinking,with Chinese factory output barely growing and powerful European manufacturing countries falling deeper into malaise,surveys showed

Written by Reuters | London/singapore | Published: June 2, 2012 1:10 am

Some of the world’s major economies are faltering or shrinking,with Chinese factory output barely growing and powerful European manufacturing countries falling deeper into malaise,surveys showed on Friday.

In Britain,manufacturing activity shrank at its fastest pace in three years last month as the global economic slowdown hit demand for its goods.

“It doesn’t bode well for the second quarter,” said Sian Fenner,global macroeconomist at Lloyds Banking Group.

“It could start feeding through to sentiment in the United States,although at the moment the United States is holding up reasonably well,and there are worrying signs from China.”

Signs of a faltering recovery in the United States have fed investor fears. The critical US non-farm payrolls report,follows data on Thursday that showed private employers created a net 69,000 jobs in May than expected last month.

Equities,the euro,sterling and growth-linked currencies all fell after Friday’s gloomy survey data.

Markit’s Eurozone Manufacturing Purchasing Managers’ Index (PMI) dropped to 45.1 in May from 45.9 in April,slightly above a preliminary reading but marking its lowest level since June 2009.

It has been below the 50 mark that divides growth from contraction for 10 months. Similarly the output index fell to 44.6 from April’s 46.1,also the lowest since June 2009.

Declines in two gauges of China’s manufacturing sector were particularly worrying for investors looking to the world’s second biggest economy to pick up the slack created by Europe’s debt crisis and the sluggish US economy. China’s annual economic growth is expected by analysts to fall to 7.9 percent in the second quarter,the first dip below 8 percent since 2009. That could pile pressure on authorities to attempt further stimulus.

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