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 The latest business surveys across Asia and Europe paint a darkening
picture and are likely to prompt more calls for central banks around
the world to loosen monetary policy even further.
"The data probably increases the case for more stimulus in certain
parts of the world, especially from the People's Bank of China and
the European Central Bank," said Philip Shaw, economist at Investec
in London.
"Those economies that are at less advanced paths of the recovery
cycle -- the key example is the euro zone, where we're looking at
more disinflation -- may well find more stimulus is in order."
Surveys of China's factory and services sectors showed the world's
second largest economy may be cooling more rapidly than earlier
thought, with deeper job cuts.
Taken together with a stock market crash in Shanghai during the
summer and a surprise devaluation of the Chinese yuan, the data
highlight just how difficult it will be for policymakers to steer
China's economy out of the biggest slowdown in decades.
"Two straight months of manufacturing sector contraction with a
depressed equity market suggests China's third-quarter GDP growth is
likely to have slowed to 6.4 percent," economists at ANZ said.
CHINA WORRIES
The Chinese government is due to release third-quarter GDP data on
Oct. 19. It reported steady growth of 7 percent in both the first
two quarters of the year, a figure that many analysts and investors
say is overstating the actual rate.
The official manufacturing Purchasing Managers' Index in China
inched up to 49.8 in September from 49.7, but still suggested
conditions were deteriorating. A private survey focusing on small
factories pointed to an even sharper cooldown. Readings below 50
signal a contraction.
China is a major importer of raw materials, especially from
commodity producers such as Australia, South Africa and Canada, and
an exporter of finished goods. A slowdown there is likely to be felt
in global economies already grappling with weak demand and
lackluster growth and inflation.
Its effects are already being felt by regional trade partners such
as South Korea, Vietnam, Malaysia, Indonesia and India where
manufacturing activity either contracted or dipped in September.
Concerns over China and global market volatility figured high on a
list of reasons the U.S. Federal Reserve did not raise interest
rates last month.
A U.S. survey of manufacturers from the Institute of Supply
Management due later on Thursday is likely to show factory activity
there is dangerously close to contraction, underlining the global
nature of the current manufacturing downturn.
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The U.S. ISM factory index is forecast to slip to 50.6 from 51.1,
according to a Reuters poll of 87 economists.
MORE ECB STIMULUS AS PRICES DROP
Signs that China is losing steam have dented commodity prices,
notably oil, and fueled a global disinflation trend since June last
year, leading a record number of central banks to ease policy.
In the euro zone, where the central bank is six months into a 1.1
trillion euro asset purchase program, inflation dipped below zero
again in September, an early estimate showed on Wednesday.
Combined with the PMI survey data that showed factory growth
weakened slightly last month, with slowing new orders and output,
that is likely to prompt the ECB to expand its stimulus program.
Markit's final manufacturing PMI was 52.0 last month, lower than
August's 52.3. An index measuring output that feeds into a composite
PMI, due on Monday and seen as a good guide to growth, fell to 53.4
from 53.9.
ECB policymakers, led by President Mario Draghi, have hinted the
60-billion-euro-a-month bond-buying scheme could be enhanced in size
or duration if inflation is seen missing its goal of near 2 percent
even by 2017.
With the latest factory PMI showing manufacturers started cutting
prices again to drum up new business, it is unlikely inflation will
start to rise meaningfully anytime soon.
Factories in Europe's number one economy, Germany, performed better,
however, driven by strong output from consumer goods producers and
rising new orders.
The PMIs also showed French manufacturing grew faster than first
thought in September, while British factory growth lost steam and
shed jobs for the first time since 2013.
The drag on the UK economy is likely to weigh on the Bank of England
which is considering when the appropriate time is to raise interest
rates from the current 0.50 percent, where they have stayed since
March 2009.
(Reporting by Winni Zhou, Xiaoyi Shao and Kevin Yao in BEIJING, Andy
Bruce in LONDON, Tina Bellon and Michael Nienaber in BERLING and
Michel Rose in PARIS; Editing by Mark Trevelyan)
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