Fresh concerns about the global economy emerged
Thursday after the release of weak key economic indicators for China
and Europe, as well as data confirming the fragile state of the US
labour market.
While the closely watched purchasing managers' index (PMI) for the
eurozone showed the debt-hit region sliding deeper into recession
territory in September, the PMI for China edged up only slightly,
underscoring the downbeat mood among manufacturers in the world's
second biggest economy.
At the same time, the US Labour Department said initial claims for
unemployment benefits fell less than forecast, to a seasonally
adjusted 382,000.
The mood among investors had already been dampened by the friction
between China and Japan over a chain of disputed islands.
The London-based HSBC bank's preliminary manufacturing PMI for
China nudged up in September, but only to 47.8, from 47.6 in August.
This consequently helped to fuel worries about the nation's ability
to sustain economic growth. A reading below 50 indicates contraction.
The new round of downbeat economic news sent shares down around
the world, with China's two main stock markets slumping more than 2
per cent to hit a 43-month low.
Stocks in Europe fell back and New York's Dow Jones Industrial
Average opened down 0.38 per cent.
The London-based Markit economic research group said its closely
watched composite purchasing managers' index (PMI) for the 17-member
currency bloc fell from 46.3 in August to 45.9 in September. This was
its lowest level in more than three years.
Analysts had expected that the index for the region's service and
manufacturing sectors would have edged up to 46.6 points this month
after the European Central Bank announced a new bond-buying programme
to help ease tensions surrounding the eurozone's debt crisis.
Instead, the indicator's preliminary reading for September fell at
its fastest pace since June 2009.
"The eurozone downturn gathered further momentum in September,
suggesting that the region suffered the worst quarter for three
years," said Markit chief economist Chris Williamson.
He went on to warn that it was now likely that the currency bloc
will slump into recession during the three months to the end of this
month.
"The flash PMI is consistent with gross domestic product
contracting by 0.6 per cent in the third quarter and sending the
region back into a technical recession," he said.
This follows a 0.2-per-cent quarter-on-quarter contraction in the
currency bloc's economy during the three months to June.
The downbeat eurozone survey came despite the composite PMI for
Germany hitting a five-month high this month.
But dragging the overall indicator down was a plunge in the
September reading for France, which plummeted to a 41-month low of
44.1 points. France is the eurozone's second biggest economy.
For Germany, Markit said its composite PMI in the eurozone's
biggest economy had risen to 49.7 points in September, from 47 in
August.
A breakdown of the German PMI showed the reading for the
manufacturing sector climbing to a six-month high and the service
sector breaching the key 50-point mark to hit its highest level in
four months.
But, releasing the PMI for Germany, Markit said the indicator
pointed to near stagnation in the nation's private sector.
"It remains too early to say, however, whether Germany will
continue to buck the trend, especially as it continued to see a
strong rate of loss of new orders in both manufacturing and
services," said Williamson.
Markit only provided details for Germany and France in its
release.
However, the PMI pointed to a sharp downturn underway across large
parts of the eurozone as governments step up efforts to slash high
deficit and debt levels by rolling out tough fiscal austerity
programmes.
The fall in the eurozone PMI came in the wake of declines in
widespread declines in production and new orders across the region,
Markit said.
Equally worrying, Markit said employment in the eurozone fell for
the ninth consecutive month, dropping at the fastest rate since
January 2010 as the backlog of orders fell sharply.
