London - The euro zone economy is expanding slowly, according to surveys released yesterday that show the rate of growth has eased unexpectedly in the private sector this month, although globally, factories in China ratcheted up production.
Data due later yesterday were expected to show factories in the US also eased back on the throttle this month.
“We’ve seen over the last several months a significant improvement in a lot of the business indicators for the advanced economies, but they are still not at particularly high levels by historical standards,” Andrew Kennigham, a senior global economist at Capital Economics, said.
“These numbers are suggesting the improvement may be beginning to tail off.”
Markit’s flash composite purchasing managers’ index (PMI) for the euro zone fell to 51.5 from September’s two-year high of 52.2, below all forecasts in a Reuters poll that predicted an uptick to 52.5.
Readings above 50 denote growth, so the index showed that the region’s economic recovery is taking root, although it remains delicate.
Yesterday’s index, based on surveys of thousands of companies across the region and seen as a good guide to economic growth, pointed to a 0.1 percent to 0.2 percent expansion this quarter, Markit said. This is in line with a Reuters poll earlier this month.
ING’s Martin van Vliet said: “We expect the euro zone economy to remain on a recovery path, but the weaker-than-expected PMI reading reinforces the view that it will likely be a sluggish and bumpy recovery.”
China’s flash PMI, the earliest gauge of its monthly economic performance, offered some positive news after disappointing export figures and last month’s manufacturing PMI, which had shown weak domestic demand. It rose to 50.9, a seven-month high.
“China’s growth recovery is becoming consolidated into the fourth quarter following the bottoming out in the third,” said Qu Hongbin, an economist at index sponsor HSBC.
In the first nine months of the year China’s $8.5 trillion (R83 trillion) economy grew 7.7 percent from a year earlier, putting it on track to achieve Beijing’s target of 7.5 percent for this year. But that would be the weakest growth in 14 years.
The slowdown in Asian economies may last for the rest of this year as weak global growth and reforms in many countries hinder activity, Reuters polls show. Growth in China and India, the two regional powerhouses, are likely to languish at multi-year lows.
Euro zone growth is seen tepid at best through to at least 2015, having escaped from recession in the second quarter on strong German growth.
This month’s flash PMI shows factories in Germany have stepped up a gear, as expected, although its service industry suffered a surprising slowdown in growth. The situation was bleaker in France where manufacturing activity declined at a faster pace and services expansion all but ground to a halt. – Reuters