China and eurozone both see contraction in manufacturing

BEIJING/TOKYO/LONDON

Workers walk through an aluminium ingots depot in Wuxi, Jiangsu province Sept 26. China’s official manufacturing managers’ index (PM) may have edged up to 49.8 in September from a nine-month low of 49.2 in Aug. REUTERS photo

China’s manufacturing activity contracted for a second straight month in September, according to official data released yesterday, falling short of expectations for expansion. Meanwhile eurozone manufacturing put in its worst performance in the three months to September since the depths of the Great Recession, with factories hit by falling demand despite cutting prices, a business survey showed yesterday -- pointing to a new recession.

The Chinese government’s purchasing managers’ index (PMI) stood at 49.8 in September, a modest improvement on 49.2 in August, according to the China Federation of Logistics and Purchasing and the National Bureau of Statistics. A PMI reading above 50 indicates expansion, while one below that mark points to contraction. China’s manufacturing sector has struggled as the country’s once red-hot economy negotiates a slump that began last year. Both Europe and the United States are key Chinese trading partners and global woes surrounding the eurozone debt crisis, plus a weak US economy still suffering from lackluster growth and high unemployment, have been drags on exports.

“The manufacturing side is still very weak,” independent economist Andy Xie said, pointing to sluggish exports as one reason. An even more important factor, he said, was a major slump in China’s property market that has hurt demand for building materials such as steel and cement.

China’s economic growth slowed to 7.6 percent in the three months through June from the same period the year before, the poorest result in three years since the height of the global financial crisis. Chinese authorities have taken steps this year to bolster the economy with two interest rate cuts in quick succession and by easing restrictions on how much money banks must keep on hand in an effort to boost lending and growth. But so far the measures have had little impact.

Separately, a quarterly survey by Japan’s central bank shows deepening pessimism over the economy among the country’s big manufacturers. The Bank of Japan’s quarterly “tankan” index, released yesterday, was minus 3, a worsening from the previous quarter’s minus 1. Sinking exports due to feeble demand in crisis-stricken Europe and anti-Japanese protests in China have reinforced the gloom among leading companies.

Factories helped lift the 17-nation bloc out of its last recession but the business survey suggests a downturn that began in smaller periphery countries has taken root in core members Germany and France.

“Despite seeing some easing in the rate of decline last month, manufacturers across the euro area suffered the worst quarter for three years in the three months to September,” said Chris Williamson, chief economist at data collator Markit.

Markit’s Eurozone PMI rose to 46.1 in September from 45.1 in August and above the preliminary reading of 46.0. The output index rose to 45.9 from August’s 44.4 but chalked up its seventh month of decline.

The euro zone escaped from the last recession in 2009 but a debt crisis that began in Greece almost three years ago has wreaked havoc across the region and threatened to bring the whole currency union crashing down.

German manufacturing shrank for a seventh straight month in September as Europe’s largest economy felt the impact of the region’s debt crisis. Markit’s PMI for Germany, released yesterday, rose to 47.4 in September, its highest since March but still below the 50 line that divides growth from contraction.

France shrank to 42.7
France’s manufacturing sector deteriorated sharply in September, shrinking at its fastest in three and a half years, according to the final Markit/CDAF PMI for the manufacturing sector. The index slumped to 42.7 in September from 46.0 in August, hitting its lowest since April 2009.

Italian manufacturing activity contracted for the 14th month and Spain’s manufacturing sector shrank for the 17th straight month in September.

Compiled from Agence France-Presse, AP and Reuters stories by the Daily News staf.