Worryingly for policymakers at the European Central Bank, who are
struggling to bolster growth and drive up dangerously low inflation,
factory activity declined in the euro zone's three biggest
economies: Germany, France and Italy.
"The concern is the ongoing lack of any real growth in the euro
zone. We are dealing with very low price pressures, and when that
comes with weak growth, like in the euro zone, it raises concerns,"
TD Securities head of global strategy, Richard Kelly, said.
Markit's final November manufacturing Purchasing Managers' Index (PMI)
for the bloc was 50.1, its lowest reading since June 2013 and down
from a flash reading on Nov. 19 of 50.4, despite price cutting made
possible by tumbling input costs.
That is barely above the 50 mark that separates growth from
contraction and, in a sign that there is little prospect of
improvement in December, new orders declined for a third month.
The growth slowdown comes despite factories cutting prices at the
steepest rate since mid-2013 although neither factor will push the
ECB into altering its already very loose policy when it meets on
Thursday, according to a Reuters poll. [ECB/INT]
Annual inflation fell to 0.3 percent in November, firmly in the
ECB's deflation "danger zone", and as oil sank to its lowest in over
five years on Monday with the industrial bellwether copper not far
behind, there are few reasons to expect any meaningful pick-up.
Both U.S. crude and Brent have now fallen for five straight months,
the longest losing streak since the 2008 financial crisis and the
rout has spread to gold and silver while the dollar rose to
seven-year peaks against the yen.
Lower commodity prices are a boon to consumer spending power but
have damaging side effects in a world where official interest rates
are already at historic lows in many countries.
Slowing inflation acts as an unwanted tightening of policy as it
pushes up real interest rates, one reason China and Japan surprised
with new stimulus measures in recent weeks.
After saying for months China does not need any big economic
stimulus, the central bank wrongfooted markets by lowering rates in
Monday's gloomy news began in Asia with China's HSBC/Markit PMI
touching a six-month trough of 50.0. The official version was
scarcely better, slipping to 50.3 in November from October's 50.8.
[to top of second column]
"This is the lowest reading since March and highlights downward
pressure on China's growth in the manufacturing sector," Credit
Agricole economist, Dariusz Kowalczyk, said.
China's troubles were felt broadly across the region, with South
Korea reporting exports to Asia's economic powerhouse falling for
the first time in three months, while its measure of manufacturing
activity stayed stuck in contractionary territory.
In Indonesia, the PMI was at its lowest since the survey began in
April 2011, while in Japan, the Markit/JMMA version of the PMI
eased. The economy slipped into recession in the third quarter as
the impact of a hike in sales taxes lingered longer than anyone
Still, the extent of the contraction may have been overstated, given
figures out on Monday showed business investment was stronger than
India was a rare bright spot, as it has been for a few months now,
with its PMI climbing to a 21-month high last month.
British manufacturing activity unexpectedly picked up a little speed
as domestic demand offset falling exports from Europe and emerging
A PMI covering the United States, due later on Monday, is expected
to show solid but slowing growth.
(Editing by Louise Ireland)
[© 2014 Thomson Reuters. All rights
Copyright 2014 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed.