01 April 2015

[010415.EN.BIZ] PMI Cites Slowdown In China While EU and US Factory Output Expands

A SLOWDOWN among Chinese factories has fuelled expectations of more monetary stimulus as China's flash HSBC/Markit Purchasing Managers Index (PMI) dipped to an 11-month low of 49.2 in March, below the 50 level that separates growth from contraction.

"The deteriorating PMI confirmed that downside risks to China's 2015 growth have started to materialise. We expect an accelerated monetary easing cycle and a loosening of the fiscal stance," said Jian Chang at Barclays.

Some expected China's first quarter to slip below Beijing's seven per cent target, widely seen as needed to keep employment steady.

China's economic slowdown is stabilising, with employment and services among the bright spots, Vice Premier Zhang Gaoli said last week, Reuters reported.

China's leadership said it would tolerate slower growth as long as the labour market remained resilient. But the latest PMI contracted for a 17th straight month, hitting its lowest since the depths of the global financial crisis.

Meanwhile, Euro zone businesses ramped up activity in March as the European Central Bank (ECB) started printing money to spur economic growth. US manufacturing growth also edged up despite a stronger US dollar and the threat of an interest rate rise from the Federal Reserve later this year.

The Eurozone Composite Flash PMI from data vendor Markit, based on surveys of thousands of companies and seen as a good growth indicator, jumped to a near four-year high of 54.1 from February's 53.3.

The surveys pointed to first-quarter euro zone economic growth of 0.3 per cent, Markit said, matching the previous three months, but shy of the 0.4 per cent median forecast in a Reuters poll taken earlier this month.

The ECB began its quantitative easing programme to buy bonds worth more than EUR1 trillion in March.

"I wouldn't want to give QE too much credence at this stage," said Peter Dixon at Commerzbank. "The ECB has only been buying for a couple of weeks and QE takes a long time to have any impact."

Growth in the US manufacturing sector edged up to a five-month high in March, according to Markit. The preliminary US manufacturing PMI rose to 55.3, its highest since October when the final PMI was 55.9.

"Manufacturing regained further momentum from the slowdown seen at the beginning of the year, with output, new orders and employment growth accelerating in March," said Chris Williamson, Markit's chief economist.

The flash reading of the index measuring new orders also rose in March to the highest since October, coming in at 56.4, compared with February's final reading of 55.8. Employment growth also rose in March from February, Markit said.

Source : HKSG.

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