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 Central banks from Switzerland to Turkey, Canada and Singapore have
already loosened monetary policy this year and chances are high the
Reserve Bank of Australia will cut rates for a second time in as
many months on Tuesday.
The People's Bank of China (PBOC) on Saturday cut its benchmark
lending and deposit rates, pre-empting official data which showed a
second consecutive month of shrinking manufacturing activity.
The European Central Bank will meanwhile start its trillion-euro
quantitative easing program this month.
The latest Markit Eurozone Manufacturing Purchasing Managers' Index
(PMI) still pointed to only a modest pace of growth across factories
in the euro zone but some economists were sounding a bit more
optimistic about the future.
The latest PMI held steady at 51.0 in February, slightly below an
earlier flash reading of 51.1 and just above the 50 threshold that
separates growth from contraction.
"A weaker euro, lower oil prices, better economic environment and
accommodative monetary policy should support confidence in the
coming months," wrote Apolline Menut, economist at Barclays.
Chris Williamson, chief economist at Markit, also sounded more
optimistic, noting that despite a "disappointing headline figure"
there were pockets of growth, noting boom times for Ireland.
But while German manufacturing growth gained pace and Italian
factory activity increased for the first time in five months, a
downturn in France worsened in February. (For a graphic: http://link.reuters.com/xup22v)
Separate official data on Monday showed euro zone inflation fell by
less than expected in February and core inflation held steady, while
unemployment eased in January for the third consecutive month.
In Britain, manufacturing growth hit a seven-month high, adding to
signs that the UK economy has started on a stronger footing driven
by domestic demand.
A comparable report on manufacturing from the U.S. Institute for
Supply Management is expected to show a slight slowdown in momentum,
easing to 53.1 in February from 53.5, according to a Reuters poll of
economists.
MIXED NEWS IS BAD NEWS
China's official Purchasing Managers' Index (PMI) inched up to 49.9
in February from January's 49.8, a whisker below the 50-point level
separating growth from contraction, but above more pessimistic
analyst forecasts for a 49.7 reading.
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There was better news from the private HSBC/Markit version of the
PMI on Monday, which climbed to a seven-month high of 50.7 in
February, from 49.7 in January, as new orders picked up.
But it also showed China's manufacturers were struggling to cope
with erratic export demand and deflationary pressures.
That suggests more PBOC easing and scope for fiscal policy to play a
part with government spending likely to pick up after the National
People's Congress meeting this week.
"The priority has been shifted to safeguard growth," wrote analysts
at OCBC Bank. "We still expect one more interest rate cut in the
second quarter and the next possible move is likely to be a reserve
requirement ratio cut."
Over the weekend, India's reform-minded prime minister, Narendra
Modi, released a budget that pleased economists and investors with
pledges to spend more on modernizing aging roads and railways while
keeping borrowing in check.
Ratings agency Moody's judged that the budget prioritized growth
over deficit reduction.
"Recent policy announcements, including the budget, support Moody's
expectation that India's growth will remain stronger than the global
average, and more robust than the median for similarly rated
sovereigns," the agency concluded.
The February HSBC PMI for India dipped to a five-month low in but at
52.9 still pointed to solid growth in the sector.
(Editing by Catherine Evans)
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