Chinese output strengthens as US and EU slump

PUBLISHED : Friday, 25 October, 2013, 3:23am
UPDATED : Friday, 25 October, 2013, 4:26pm

Factories in China boosted production this month, but US manufacturing output fell for the first time in four years while the euro zone economy lost momentum, surveys showed yesterday.

The data suggests the world economy faces speed bumps as China tries to rebound and growth in advanced economies remains fragile.

One such hurdle was a partial US government shutdown that lasted for the first 16 days of this month. That was likely to have disrupted factory output in the world's largest economy.

According to financial data firm Markit, US factory output contracted this month for the first time since late 2009 and the overall pace of growth was the slowest in a year.

Markit chief economist Chris Williamson said the survey "suggests that the disruptions and uncertainty caused by the crisis hit companies hard", even if determining the precise impact of the shutdown remains difficult.

There was some positive news from the world's second largest economy. The Markit/HSBC Purchasing Managers Index for China rose to 50.9 this month from 50.2 in September, the fastest expansion in seven months.

"China's growth recovery is becoming consolidated into the fourth quarter following the bottoming out in the third," said HSBC economist Qu Hongbin.

But momentum slowed in Europe this month. Markit's "flash" Composite Purchasing Managers Index for the euro zone, based on surveys of thousands of companies across the region, showed the economy lost a bit of steam this month.

While the index was still above the 50 mark that separates growth from contraction, it retreated to 51.5 after hitting a two-year high of 52.2 in September.

"We've seen over the last several months a significant improvement in a lot of the business indicators for the advanced economies, but they are still not at particularly high levels by historical standards," said Andrew Kennigham, senior global economist at Capital Economics. "These numbers are suggesting the improvement may be beginning to tail off."

In Germany, factory activity grew, the PMI survey showed, although the country's service industry saw a surprising fall in the pace of growth. But things were bleaker across the border in France, where manufacturing activity declined at a faster pace and services expansion all but ground to a halt.