Global fac­to­ries hit hard in Feb

The Pak Banker - - MAR­KETS/SPORTS -

Man­u­fac­tur­ing ac­tiv­ity across much of Asia shrank in Fe­bru­ary while fac­tory growth waned through­out Europe, deal­ing a fur­ther blow to pol­i­cy­mak­ers who are strug­gling to stim­u­late their economies and spur in­fla­tion.

Chi­nese pro­duc­ers suf­fered a sev­enth straight month of de­cline in Fe­bru­ary, a Pur­chas­ing Man­agers' In­dex (PMI) sur­vey showed just a day af­ter the Peo­ple's Bank of China re­sumed a pol­icy eas­ing cy­cle in a fresh ef­fort to drive growth.

Sis­ter sur­veys showed fac­to­ries in the euro­zone raised pro­duc­tion at the weak­est pace for a year as deep dis­count­ing failed to put a floor un­der slow­ing or­ders growth. Their Bri­tish coun­ter­parts had their worst month in nearly three years.

Bri­tish fac­to­ries had their weak­est month in nearly three years in Fe­bru­ary, a sur­vey showed on Tues­day, rais­ing a warn­ing sig­nal that the coun­try's re­cov­ery from the fi­nan­cial cri­sis could be slow­ing fur­ther.

A sur­vey of man­u­fac­tur­ing out­put from the United States is likely to show a fifth straight month of con­trac­tion there. None of the 88 econ­o­mists polled by Reuters ex­pected growth.

"If you were look­ing for ev­i­dence of man­u­fac­tur­ing growth sta­bil­is­ing then this isn't it. There were a cou­ple of low spots that are quite sur­pris­ing," said Philip Shaw at In­vestec.

"(But) to get a fuller pic­ture of what is go­ing on we will have to see ev­i­dence from the ser­vice sec­tor." Monthly ser­vice in­dus­try PMI sur­veys are due later this week. Tues­day's down­beat data may sharpen the fo­cus of of­fi­cials from the world's lead­ing economies who de­clared at a week­end G20 meet­ing they needed to look beyond ul­tra-low rates and print­ing money to re­an­i­mate growth.

On Mon­day, the PBOC an­nounced it was cut­ting the amount of cash banks must hold as re­serves for the fifth time since Fe­bru­ary 2015 yet an­a­lysts ex­pect it will have to do more, in­clud­ing cut­ting in­ter­est rates this year.

The euro­zone has been fac­ing sim­i­lar tra­vails and although the over­all ex­pan­sion was slightly bet­ter than pre­vi­ously thought, Markit's man­u­fac­tur­ing PMI will make gloomy read­ing for the Euro­pean Cen­tral Bank ahead of next week's pol­icy meet­ing.

The sur­vey showed fac­to­ries cut prices at the steep­est rate since mid-2013. The ECB wants in­fla­tion near two per cent but prices across the bloc fell 0.2 per cent last month, short of al­ready de­pressed ex­pec­ta­tions and vir­tu­ally en­sur­ing an­other round of pol­icy eas­ing.

An ad­di­tional cut to the ECB's de­posit rate is al­most cer­tain on March 10 and there is an even chance the cen­tral bank will in­crease the size of its ?60 bil­lion a month bond buy­ing pro­gramme, a poll found last month.

Aus­tralia's cen­tral bank gov­er­nor, Glenn Stevens, ob­served on Tues­day that con­di­tions have be­come more dif­fi­cult for a num­ber of emerg­ing mar­ket economies and noted "China's growth rate has con­tin­ued to mod­er­ate".

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