Weak China and US figures rattle global markets

American job creation falls short of expectations as Beijing exports slump by a more than a fifth

THE outlook for the world economy has darkened after shock figures on Chinese trade and US employment spooked markets yesterday.

American jobs creation in February was far worse than hoped, with just 20,000 workers added to payrolls – some 160,000 fewer than expected.

The drop follows a sharp fall in Chinese shipments, which have been described as a “trade recession”. The 20.7pc slump was four times greater than predictions of a 5pc decline.

Indications of a sharp negative turn- around in US growth have been so strong that some economists now believe the Federal Reserve’s next move will be to cut, rather than raise, interest rates. This is despite annual wage growth – a key trigger for inflation – hitting its highest level since 2009.

The Chinese figures have revealed the heavy cost of the trade war between the US and the world’s secondlargest economy.

America is China’s most important export market, but rising tensions and billions of dollars worth of tit-for-tat tariffs have weighed heavily on commerce between the nations. Crucial trade talks have also been postponed by Beijing and Washington. The delay, aimed at ending trade war hostilities, has weighed heavily on markets and business optimism.

In London the FTSE 100 fell 0.75pc, mirroring similar falls on the Continent. Sterling sank 1pc against the euro and was back down to the $1.30 level.

On Thursday the European Central Bank (ECB) sounded an alarm about escalating risks to global growth.

The Frankfurt-based institution slashed its economic forecasts for the eurozone from 1.7pc to just a 1.1pc expansion in GDP this year. A Chinese economic slowdown was cited as a major trigger for the downgrade.

Mario Draghi, ECB chief, said the bloc was feeling the force of softening world trade volumes. There were also risks building in emerging markets and a “potential slowdown in the US” on the way, he added. Volatile trade talks had also resulted in “lower [economic] confidence”.

Hopes for boosting global growth now rest on a package of stimulus measures from Beijing, including looser monetary policy.

However, economists have repeatedly warned that any cash injection in China will not be of the same magnitude as that seen during other downturns in the past decade.

The trade figures “reinforce our view that China’s trade recession has started to emerge”, said Raymond Yeung of ANZ Bank. He had little hope for a rebound in the near term.

Even if there is an end to trade hostilities between the two superpowers, economists have warned that it will not be enough to meaningfully boost growth.

This is because a broad-based weakening in the global economy would offset any potential increase in trade arising from removing tariffs levied on goods between China and the US.

The poor figures supported other evidence of cooling global demand and also pointed to subdued domestic economic activity, said Julian Evanspritchard at Capital Economics.

“A row back in US tariffs would provide a mild boost to exports but not enough to offset the broader external headwinds,” he added.

There has been a spate of negative data from China in recent months suggesting that factories were facing slowing order numbers.

“The PMIS [business surveys] have been pointing to a sharp drop off in exports and this could be it,” said Freya Beamish of Pantheon Macroeconomics.