Prospects for a sustained global economic recovery darkened on Thursday as sputtering factory activity in Europe overshadowed more upbeat data from Asia, at a time when central banks are running out of policy options and reluctant to do more.
But news that US jobless claims hovered near a four-year low was a reminder that the world’s largest economy, where the global financial crisis began in 2008, is on a more solid and possibly more self-sustaining recovery path. Data also showed that Americans held back with their personal expenditure in January, showing a smaller rise than expected against a backdrop of mild inflation pressure.
In Europe, factory activity at best stagnated, and in Spain and Greece it contracted sharply, according to the latest purchasing managers’ indexes. Chinese and Indian manufacturing is growing, but at a more modest pace than in the recent past.
But despite another bailout for Greece and success in lowering borrowing costs Europe is still casting a dark shadow over the world economy. What is most troublesome is that several countries in the eurozone periphery such as Greece, Spain, and to a lesser extent Italy, are in recession, while the strongest economies — Germany and France — are barely growing.
Markit’s Eurozone Manufacturing Purchasing Managers’ Index (PMI) rose to 49.0 last month from January’s 48.8, in line with a flash reading. But it has now been below the 50 mark that divides growth from contraction since July. It now looks all but certain the 17-member eurozone is stuck in a mild recession. Even Germany, a top world exporter of manufactured goods, is struggling.
Growth in US manufacturing unexpectedly cooled in February and consumer spending was flat in January for the third straight month after accounting for inflation, casting a pall over the economic outlook. The Institute for Supply Management said its index of national factory activity fell to 52.4 last month from 54.1 the month before. The reading was shy of expectations of 54.5.
Greece’s factories are in freefall and its economic data point to depression rather than recession. Its manufacturing sector shrank at the fastest pace in at least 13 years just as the country is set to be hit by another wave of austerity cuts in return for the latest bailout cash.
The economic picture remained slightly better in Britain than continental Europe. But its manufacturing sector grew at a slower pace than expected in February.
Asia is slowing but remains the growth engine of the world economy. Its major central banks could also cut interest rates if needed to cushion any further slowdown.
New orders for Asia’s manufacturing powerhouses perked up in February, easing some concerns about the global economic slowdown, with China’s factories growing more than expected.
The surveys, the first leads on factory activity in the region, offered tentative signs of a recovery from the slump in the final months of 2011 caused by faltering external demand and fragile business and consumer sentiment.
But the economic picture was far from complete. India’s manufacturing expansion eased back from its strongest pace in eight months for a PMI of 56.6 in February compared with 57.5 in January. However, new orders touched a 10-month high. —