Signs of steady rise in global growth
Business surveys indicate Moody’s positive projections are correct
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.
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.
Germany, Europe’s largest economy, led the charge. France lagged behind but is still enjoying its best quarter for six years.
As the bloc’s economic performance improves, the ECB at its June 8 meeting may raise its risks assessment to balanced, a Reuters poll of economists showed.
Across the Channel, Britain’s factory PMI slipped to 56.7 from a three-year high in April. But aside from the previous month’s PMI, that was its strongest reading since June 2014.
Earlier readings showed signs Asian economies generally remained buoyant in the second quarter, with manufacturing activity continuing to improve at a more modest pace and business confidence remains strong overall.
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.
Yet, Tim Condon, ING’s chief Asia economist, said the growth outlook for the region remained positive as strengthening economies in the US, Japan and Germany would support shipments from the region.
On Wednesday, Moody’s said G20 economies, which account for 78% of the global economy, are expected to grow 3.1% on year in 2017 and 2018.
The agency also said the biggest risks to global growth, including protectionism and European Union exits, seemed to have subsided.
China is widely expected to slow over the year due to reduced property-related investment as liquidity tightening measures of the central bank, including limits on home mortgage lending, take effect.