The surveys released on Monday underscored a still uneven pace of
global economic growth and suggested an onslaught of central bank
stimulus is unlikely to dry up anytime soon.
Asian shares fell to a three-week low after the HSBC/Markit China
services purchasing managers' index (PMI) fell to a two-year low of
50.9 from 52.5, highlighting anxiety about the world's second
"That just goes to confirm everyone's suspicions that the Chinese
economy is shifting down onto a lower growth path, and that we will
see a more balanced growth pattern across the world this year," said
Peter Dixon, economist at Commerzbank. He expects improved growth in
Europe and the United States.
Indeed, most signs point to ongoing improved U.S. growth, and recent
data has been robust enough to persuade the Federal Reserve to start
winding down its monthly asset-purchase plan.
Even so, the economy is seen as not strong enough to withstand
higher interest rates for a while, with the Fed not expected to
raise them for at least another year, and Fed officials have
stressed that unemployment remains uncomfortably high.
Business surveys from the Institute of Supply Management and Markit
showed growth in the vast U.S. services sector slowed a bit in
But hiring was a silver lining in both reports, which showed
employers took on more workers.
"The U.S. economy appears to have ended 2013 on a strong note,
especially in relation to hiring," said Chris Williamson, Chief
Economist at Markit, suggesting the upturn "sets the scene" for
strong employment across industries in December.
The Markit survey for the euro zone went the opposite way, with the
composite index rising to 52.1 from 51.7, with new orders coming in
at their fastest pace in more than two years. Any number above 50
Markit said that while the euro zone data suggested only a 0.2
percent quarterly rate of economic growth, "the PMI signaled a
strong turnaround in the health of the economy during the course of
The question is whether that can be sustained, particularly when
demand in China, one of the euro zone's biggest trading partners, is
just bumping along.
Growth in Britain's services sector slowed unexpectedly in December,
but confidence rose and the economy still looks likely to have
recorded its strongest expansion since 2007 last year.
[to top of second column]
DISINFLATION TAKES HOLD
Inflation pressures, which have been dormant in Western economies
for many years now, have taken a back seat to discussions about the
world outlook but could again come to the forefront given current
The European Central Bank, which targets inflation at just under 2
percent, cut interest rates in November to a record low of 0.25
percent after surprise news of a plunge in euro zone inflation to
just 0.7 percent.
Consumer price inflation in Germany rose 1.4 percent in the year to
December, data showed on Monday, while reports from other countries
showed a slight acceleration.
The euro zone PMIs showed new orders at the fastest pace since June
2011, while the employment index hit the 50 mark for the first time
in two years — meaning employers are now hiring as many staff as
they are laying off.
There are indications that the economy is beginning to make some
kind of progress, and places like Spain — which got clobbered during
the downturn — seem to be showing quite a rapid rate of recovery,"
said Commerzbank's Dixon.
U.S. inflation has also been tame, with the Fed's favored measure of
non-food, non-energy prices up 1.1 percent in the year to November.
Some worry that could change quickly if growth continues to pick up
through 2014, a year that will still see the Fed injecting money
into the economy, albeit at a slower pace.
Philadelphia Fed President Charles Plosser last week said he worried
that inflation could rise quickly if banks start to release the $2.4
trillion in excess reserves they now hold.
(Writing by Ross Finley and Andy Bruce;
additional reporting by Steven C. Johnson and Ryan Vlastelica in New
York and Xiaoyi Shao and Jonathan Standing in Beijing; editing by
Alison Williams and Chizu Nomiyama)
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