Europe booms while Asia has a rest
Global economy improves
FACTORIES across much of Asia ran into a soft patch in May as export demand slowed, but those in Europe enjoyed buoyant growth amid signs of steady improvement in the global economy.
Analysts said the weakness in Asia was likely to be temporary and the findings from private business surveys came a day after Moody’s Investors Service painted an upbeat picture of global growth.
Further indications the euro zone’s economy is enjoying a stable and broad-based recovery, alongside inflationary pressures, will be welcomed by policymakers at the European Central Bank (ECB).
And giving a boost to Prime Minister Theresa May a week before a national election, British manufacturing chalked up its second-fastest growth in nearly three years last month, putting the sector on track to shrug off Brexit-related uncertainty and improve on a weak first-quarter performance.
IHS Markit’s Manufacturing Purchasing Managers’ Index for the euro zone rose to 57 points in May, up from April’s 56.7 points and its highest level since April 2011. A reading above 50 points indicates growth.
Germany, Europe’s largest economy, led the charge, but IHS Markit said solid upturns were recorded in other countries as well. France lagged behind, but is still enjoying its best quarter for six years.
As the bloc’s economic performance improves, the ECB will sound a little more optimistic at its June 8 meeting, possibly raising its risks assessment to balanced or discussing removing its bias to ease policy, a poll of economists showed.
Across the Channel, Britain’s factory PMI slipped to 56.7 points from a three-year high in April. But aside from the previous month’s PMI, that was its strongest reading since June 2014. “Overall, after the sharp slowdown in GDP growth in Q1, today’s survey suggests that the manufacturing sector will play its part in an acceleration in growth in Q2,” said Scott Bowman at Capital Economics.
In a week’s time Britons vote in an early national election called by May to try to bolster her standing before talks to leave the EU.
At the start of the campaign in April, May seemed on track to win an increased majority. But polls over the past week show the opposition Labour Party has eaten into her lead.
May has highlighted the record number of people in work in her campaign, and yesterday’s figures showed manufacturers planned to hire staff at the fastest pace in nearly three years.
A similar business survey to be released in North America later in the day was expected to show solid growth. Earlier readings added to signs that Asian economies generally remained buoyant in the second quarter, with manufacturing activity continuing to improve – albeit at a more modest pace – and business confidence remaining strong overall.
Still, there were mixed readings on regional powerhouse China, with official data showing steady growth fuelled by a construction boom, but a private survey pointing to the first contraction in activity in 11 months.
After battling a multi-year trade recession, Asian exports have seen a strong rebound this year, often led by electronics. The tailwinds from Chinese commodities and tech products demand, however, appear to be fading – Reuters
A labourer works on screw processing at a machinery manufacture company in Zhoushan, Zhejiang province, China. But tech products demand in the country appears to be fading.