US, UK, China manufacturing all in slow lane
LONDON/WASHINGTON/BEIJING – Manufacturing activity growth remained sluggish in some of the world’s major economies in April, suggesting that global economic growth remains “moderate and uneven,” as the International Monetary Fund described it in its World Economic Outlook in April.
Manufacturing sector data for the eurozone and Latin America will be published on Monday after the May Day holiday in many countries on Friday.
Expansion in the US manufacturing sector weakened in April as growth in output and new orders fell, according to financial data vendor Markit.
The final reading of the US Manufacturing Purchasing Managers’ Index for April fell to 54.1 from 55.7 in March. A reading above 50 indicates growth in the sector.
April’s growth was the slowest of 2015, and “the survey results raise worries that the dollar’s appreciation is hurting the economy,” said Chris Williamson, Markit’s chief economist. The US dollar rose by about 25 percent against major currencies in the past nine months on a trade-weighted basis. .DXY
A separate survey of the US manufacturing sector by the Institute of Supply Management showed expansion at its slowest pace in almost two years in April, as a rebound in new orders was offset by employment shrinking at the fastest pace in more than five years.
The ISM index of national factory activity was 51.5 in April, matching the March reading, which had been the lowest since May 2013, though this was the 29th-consecutive headline reading at or above 50.
The ISM manufacturing employment index fell into contractionary territory for the first time since May 2013, dropping to 48.3, the lowest since September 2009, from 50.0 in March.
On Wednesday, the US Commerce Department reported gross domestic product expanded at an only 0.2 percent annual rate, down from the fourth quarter’s 2.2 percent pace.
Activity in Canada’s manufacturing sector shrank in April for the third straight month, according to the RBC/Markit Canadian Manufacturing PMI which was nearly unchanged at a seasonally adjusted 49.0 last month from 48.9 in March.
The Canadian economy is feeling the effect of the drop in the price of crude oil, a major export, and is expected to see no growth in the first quarter. Despite the weakness in the index, there were signs that regions not tied to oil were picking up, said Craig Wright, chief economist at RBC.
UK MANUFACTURING GROWTH SLOWS
Earlier on Friday, Markit reported that British manufacturing growth also slowed sharply in April, underlining the uneven nature of an economic recovery at the heart of national elections just six days away.
The UK Markit manufacturing PMI fell to a seven-month low of 51.9 from a downwardly revised 54.0 in March.
“Any signs of rebalancing the economy towards manufacturing and exports remain frustratingly elusive,” said Markit economist Rob Dobson.
The British pound fell to a three-week low against the euro after the Markit/CIPS UK Manufacturing PMI was published, and fell 1.3 percent against the US dollar.
Coming after a surprising slowdown in UK economic growth in the first quarter, the manufacturing survey will make gloomy reading for Conservative Prime Minister David Cameron and his finance minister, George Osborne, who promised a manufacturing revival shortly after coming to power in 2010. Earlier this week official figures showed that UK economic growth in the first quarter was its slowest since late 2012.
The UK Conservative Party remains deadlocked in opinion polls with the opposition Labour party, and recent signs of a slowdown in the economy have complicated the Conservatives’ decision to put the recovery at the centre of their campaign.
ASIA ALSO IN SLOW LANE
China’s factories also stayed stuck in the slow lane in April, while Japanese output went into reverse, and South Korea suffered its worst export performance in two years, adding urgency to calls for more state stimulus in all three economies.
China’s official Purchasing Managers’ Index (PMI) held at 50.1 in April, just above the mark separating growth from contraction on a monthly basis.
“As the economy still faces strong headwinds and the risk of deflation has not diminished, the authorities will need to continue to roll out easing measures in the coming months,” said Li-Gang Liu, chief economist for Greater China at ANZ.
Following an aggressive one-percentage-point cut in banks’ reserve requirement ratios last month, ANZ expects China’s central bank will lower its interest rates further this quarter.
China’s annual economic growth slowed to a six-year low of 7.0 percent in the first quarter, hurt by a housing slump and a downturn in investment and manufacturing.
In Japan, the Markit/JMMA PMI reading fell to 49.9 in April, from 50.3 in March, taking it into contractionary territory for the first time since May last year.
In South Korea, government figures showed exports fell 8.1 percent in April from a year earlier, the sharpest drop since February 2013, as shipments to China, the United States and the European Union all lost ground.