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 Euro zone firms cut prices at the fastest rate in nearly five years
and Chinese factories cut them for the sixth straight month, while
economic growth in South Korea slowed sharply, raising the prospect
of more easing from central banks in Asia.
The ECB took the policy plunge on Thursday, announcing a government
bond-buying programme which will pump hundreds of billions of euros
in new money into a sagging euro zone economy.
With Chinese factory growth stalling for a second month,
expectations are high that Beijing will announce fresh stimulus
measures soon.
"2015 is unlikely to be a particularly fantastic year with regards
to global growth," said Peter Dixon, an economist at Commerzbank.
"There is no doubt that across the world central banks are being a
little bit more aggressive. Disinflation has certainly changed the
monetary prospects."
Markit's Eurozone Composite Flash Purchasing Managers' Index (PMI),
based on surveys of thousands of companies and seen as a good growth
indicator, bounced to a five-month high of 52.2 from December's
51.4.
That beat the median forecast of 51.8 and marked the 19th month
above the 50 line denoting growth.
But Markit said it pointed to first-quarter growth of just 0.2
percent, slightly worse than the 0.3 percent predicted in a Reuters
poll last week. [ECILT/EU]
"January's small rise in the euro zone composite PMI suggests that
growth remains very slow, confirming that the ECB's latest policy
support is sorely needed," said Jennifer McKeown, senior European
economist at Capital Economics.
The index for prices charged slumped to 46.9, its lowest since
February 2010, and comes after official data showed consumer prices
fell 0.2 percent in December, the first negative print since the
depths of the financial crisis in 2009.
Falling prices in Britain gave an unexpected boost to retailers
there in December, with sales rising 0.4 percent on the month after
surging by 1.6 percent in November, the strongest growth in more
than a decade.
Business surveys due later on Friday on U.S. manufacturing may
highlight concerns that its economy is the only engine driving
global growth this year.
SLOW BOAT FROM CHINA
Emerging Asian economies will grow at a lacklustre pace this year
and next, held back by a slowdown in China and weak global demand,
while cooling inflation will probably throw open the door for
monetary policy easing, a Reuters poll showed on Friday.
China's HSBC/Markit Flash Manufacturing PMI hovered at 49.8 in
January, little changed from December, but the input prices index
fell to the lowest since the global financial crisis, reflecting a
tumble in oil prices that is spreading disinflationary pressure
throughout the globe.
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Analysts at Nomura saw more downside pressure on China's producer
prices, "enhancing our concerns over deflation".
"This looks like a trend and it will affect core inflation at some
stage. So the PBOC will very likely react to such deflation
concerns," said Chang Chun Hua, an economist at Nomura.
News out of South Korea made for uncomfortable reading as well.
Asia's fourth-largest economy grew a seasonally adjusted 0.4 percent
in the October-December period, less than half the 0.9 percent
expansion in the third quarter.
The Bank of Korea is widely expected to cut interest rates in the
first half of this year.
In Thailand, the finance minister urged the central bank to cut
rates to help the sputtering economy and said he was worried that
the strength of the baht currency will hurt exports, a key growth
engine.
Australian investors now see a bigger chance of a rate cut after
surprise easing from Canada earlier this week, while India last week
cut rates earlier than expected and hinted at more to come.
The lone bright spot in Asia was Japan, where manufacturers saw a
pickup in domestic and overseas orders this month and hired more
staff.
But even there the central bank is struggling to reach its 2 percent
inflation target two years into so-called 'Abenomics' – a mix of
aggressive monetary and fiscal policy and structural reform aimed at
pulling the country out of decades of deflation, a fate other global
policymakers are desperate to avoid.
"With very low inflation, or even negative inflation and some slack
remaining, we expect that advanced economy monetary policy will
continue to loosen overall," analysts at Citi wrote in a note to
clients.
"ECB QE will probably be scaled up further over time. We also expect
the BoJ to expand QE further around mid-year."
(Additional reporting by Choonsik Yoo in Seoul, Stanley White in
Tokyo and Ian Chua in Sydney; Editing by Hugh Lawson)
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