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 Japanese manufacturing activity shrank last month at the fastest
pace in more than three years as major earthquakes disrupted
production, while the former bright spot of India sank to a
four-month trough and growth in China was all but flat.
The euro zone reading edged up only marginally, painting a more
subdued picture of an economy that grew an encouraging 0.6 percent
between January and March.
With manufacturing dogged by insufficient demand and excess supply,
the regional readings are likely to reinforce the view that a recent
pick-up in economic momentum will be difficult to sustain and
further policy stimulus is needed.
"The backdrop remains one of sub-trend growth, inflation that is
below target, difficulty in increasing revenue as margins are
sacrificed to win modest volume gains, slow wage growth cramping
spending and central banks that have used up much of their policy
ammunition," said Alan Oster, chief economist at National Australia
Bank.
That has been a factor in foot-dragging by the Federal Reserve over
a follow-up to its December rate hike, leaving the markets in a
sweat in case U.S. policymakers move in June.
The equivalent manufacturing reading from the U.S. Institute of
Supply Management later on Monday was forecast to dip back to a
modest 51.4, from 51.8, ahead of the always-pivotal payrolls report
out on Friday.
While the Fed is contemplating when to hike next, the European
Central Bank is preparing to buy corporate bonds as part of its
trillion-plus euro asset purchase program.
So far, the massive ECB stimulus and weaker euro has yet to feed
through to euro zone factories which operated only marginally faster
in April.
Markit's Manufacturing Purchasing Managers Index (PMI) rose to 51.7
from March's 51.6, a marginal improvement from an earlier flash
estimate of 51.5.
"The economy is growing but the pace is still very moderate. There's
no reason to the ECB to change its policy stance," said Christoph
Weil, economist at Commerzbank in Frankfurt.
DEEP DISCOUNTING
Manufacturing growth was strong in Italy and, buoyed by rising
demand at home and abroad, hit a three-month high in Germany. But in
France activity contracted at the steepest rate in a year.
What will probably make particularly grim reading for ECB
policymakers is the deep price cuts factories were again forced in
to in order to drum up new business.
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The survey's output price index was 47.4, higher than March's 47.1
but the second-lowest since early 2010.
Euro zone inflation again fell below zero last month as energy
prices dropped.
Doubts about the effectiveness of the global monetary policy arsenal
resurfaced last week when the Bank of Japan refrained from offering
any hint of more stimulus, hitting stocks as the yen surged -- a
trend that continued on Monday.
Industry was already struggling to recover from the April
earthquakes that halted production in the southern manufacturing hub
of Kumamoto, and the Markit/Nikkei Japan Manufacturing PMI fell to
48.2 from 49.1 in March.
In China, Sunday's official PMI reading was barely positive at 50.1,
a cold shower for those hoping fresh fiscal and monetary stimulus
from Beijing would enable a speedy pick-up.
The findings were "a little bit disappointing", Zhou Hao, senior
emerging market economist at Commerzbank in Singapore, wrote in a
note.
"...This hints that recent China enthusiasm has been a bit
overpriced and the data improvement in March is short-lived."
South Korea's activity stabilize at 50.0, but it also reported
demand from China was the worst in three months, with exports to its
biggest market tumbling 18.4 percent on-year.
(Additional reporting by Jessica Macy Yu and Sue-Lin Wong in
BEIJING, Anu Bararia in BENGALURU, Christine Kim in SEOUL, Gavin
Jones in ROME, Leigh Thomas in PARIS and Joseph Nasr in BERLIN;
editing by John Stonestreet)
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