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Factories stall worldwide, US bucks trend

Factories stall worldwide, US bucks trend
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First Published: Thu, Dec 01 2011. 11 34 PM IST

Updated: Thu, Dec 01 2011. 11 34 PM IST
London/Singapore: Manufacturing activity is contracting across Europe and most of Asia, while a Chinese official declared on Thursday that the world economy faces a worse situation than in 2008 when Lehman Brothers collapsed.
Factory activity shrank even further in the euro zone in November, reinforcing the view that the debt-strapped region is in recession, while British manufacturing contracted at the fastest pace in two years, raising the risk that the UK economy may suffer the same fate.
This has been the case for much of the developed world for several months, with the exception of pockets of better news from the US.
US manufacturing regained momentum in November, boosted by strong growth in new orders and exports, adding to a raft of data indicating an acceleration in economic activity in the fourth quarter.
The Institute for Supply Management said its index of national factory activity rose to 52.7 from 50.8 the month before. The reading topped expectations of 51.5, according to a Reuters poll of economists.
But the economic slowdown in major developed nations, could crimp growth in the US.
“The US finds itself as one of the strongest developed economies in a sputtering global recovery,” said Alan Ruskin, head of G10 currency strategy at Deutsche bank in New York, noting that exports continued to grow.
“This is one indication that if contagion from Europe can mainly be largely contained to trade flows rather than financial contagion, the US economy can remain relatively resilient.”
China’s official purchasing managers’ index (PMI) showed factory activity shrank in November for the first time in nearly three years, while a similar PMI showed Indian factory growth slowed close to stall speed.
“The big picture here is this is an unwinding of a 20-year debt bubble,” said Peter Dixon, global financial economist at Commerzbank. “It’s going to be painful, and it’s going to be nasty. What policymakers are aiming for is a smoothing of the path.”
But those policymakers appear to be getting more worried.
Zhu Guangyao, China’s advance coordinator to the Group of Twenty talks and also a vice-finance minister, said heavily indebted countries had limited scope to act now, which will make it harder to sustain global growth as the European debt saga drags on.
“The current crisis, to some extent, is more serious and challenging than the international financial crisis following the fall of Lehman Brothers,” Zhu said.
China’s official purchasing managers’ index for November fell to 49, dipping below the 50 mark that separates growth from contraction for the first time in nearly three years.
The final euro zone manufacturing PMI for November was confirmed at 46.4, its weakest level in two years, with factory activity in both of its biggest economies, Germany and France, weakening.
The UK factory PMI fell to 47.6 in November, its lowest since June 2009, further evidence that Britain’s economy is in dangerous territory.
India bucked the trend, reporting a pick-up in export orders, although its overall PMI dipped on weak domestic demand.
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Jason Lange in Washington, Jane Lanhee Lee in Yiwu, Yoo Choonsik in Seoul, Aileen Wang and Kevin Yao in Beijing, Lucia Mutikani in Washington, Yati Himatsingka in Bangalore, Jonathan Cable and Susan Fenton in London contributed to this story.
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First Published: Thu, Dec 01 2011. 11 34 PM IST
More Topics: PMI | Factory output | China | Economy | Euro |