London and Beijing - Manufacturers across the EU and Asia changed down a gear last month as falling demand from abroad hurt Chinese output while European factory growth dipped from January’s two-and-a-half-year high.

“They are all building up to a picture which says it’s going to be okay but nothing particularly stellar. They are not helping the case for a decent pick-up in the first half of the year,” Peter Dixon at Commerzbank said yesterday.

Markit’s final euro zone manufacturing purchasing managers’ index (PMI) came in at 53.2 last month, up from a flash reading of 53 but below January’s 54 – which was the highest since May 2011. A reading above 50 indicates growth in activity.

The index measuring manufacturing output, which feeds into a composite PMI that is seen as a good gauge of growth, also dipped from January’s 33-month high.

“[This] reinforces suspicion that it is going to be far from plain sailing for the euro zone in 2014,” said Howard Archer at IHS Global Insight.

“While the euro zone may be establishing modest growth, it is still finding it hard to build up momentum.”

Gross domestic product across the region expanded 0.3 percent in the final three months of last year, thanks to stronger expansion in France and Germany, and is expected to match that pace each quarter this year.

To meet demand, firms increased headcount for the second month. But worryingly for the European Central Bank, which meets this week to set policy, inflation pressures subsided again.

Average input costs fell for the first time in six months and although factories were able to raise their prices slightly, they barely brought them up from January, possibly stoking fears of deflation in the region.

In one bright spot, British manufacturing grew quicker than expected, adding to signs that the country’s economic recovery is broadening out. Job creation in the sector hit a 33-month high.

Similarly US data – due later yesterday – was forecast to show a sliver of improvement in manufacturing, although much focus would be on new order growth, which slumped the most in more than three decades in January.

The HSBC/Markit PMI on China manufacturing fell to 48.5, a seven-month low and the third consecutive monthly decline in the index. A government PMI at the weekend had suggested the slowest growth in eight months.

“The Chinese numbers were a little disappointing compared to what we have seen in recent months,” Dixon said.

Although Chinese factories were struggling to expand as export orders fell, services firms regained some momentum. China’s official non-manufacturing PMI rose to a three-month high. – Reuters