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Manufacturing From China to Europe Weakens Amid Debt Crisis

02 June 2010 04:21 (UTC +04:00)

Baku-APA. Manufacturing growth from China to the euro region weakened in May, a sign that a rebound from the worst global recession since World War II may be slowing, APA reports quoting businessweek.com website.
Chinese manufacturing, which led a rebound from the U.S. to Japan, is weakening amid a drop in property sales and building just as Europeâ€™s debt crisis erodes investor confidence. Chinese Premier Wen Jiabao said yesterday that the world needs to guard against the possibility of a second economic slump and Norbert Reithofer, chief executive officer of Bayerische Motoren Werke AG, said last month there are still â€œnumerous risks.â€
â€œItâ€™s inevitable that thereâ€™s going to be a moderation in confidence given whatâ€™s been happening,â€ said Paul Donovan, deputy head of global economics at Zurich-based UBS AG. â€œAt this stage this reflects confidence, not production. Itâ€™s the manifestation of uncertainty in markets impacting confidence.â€
The Purchasing Managersâ€™ Index for China fell to 53.9 in May from 55.7 in the previous month, the Federation of Logistics and Purchasing said. A separate index released by HSBC Holdings Plc and Markit Economics fell to the lowest level in a year.
U.S. Report
U.K. factories held up the pace of expansion in May and Swiss manufacturing growth accelerated to the fastest on record.
The MSCI Asia Pacific Index of stocks, which in May had its biggest monthly drop since 2008 on concern Europeâ€™s debt woes may hurt the regionâ€™s growth, declined 1.2 percent today after rising over the past four days. The Stoxx Europe 600 Index today extended its biggest monthly drop in more than a year.
European policy makers last month were forced to pledge a rescue package worth almost $1 trillion to keep Greeceâ€™s debt troubles from spreading to countries including Spain and Portugal. With governments stepping up spending cuts across the region, threatening to hurt the economic recovery, the euro has shed 15.4 percent against the dollar this year.
Confidence Game
â€œWeâ€™re past the peak in growth,â€ said James Nixon, co- chief European economist at Societe Generale SA in London. â€œIn Europe, you can make a case that the sovereign-bond crisis has hurt confidence. Elsewhere in the world, thereâ€™s very little sign of a really sharp slowdown in activity, however.â€
Companies from the U.S. to Germany have relied on faster growth in emerging markets to boost sales. The Organization for Economic Cooperation and Development said on May 26 that it expects the global economy to expand 2.7 percent this year, with China seen growing more than 11 percent. The U.S. may grow 3.2 percent, almost three times the pace projected for the 16-member euro region, according to the Paris-based OECD.
Chinese policy makers are trimming stimulus this year after a $1.4 trillion lending binge revived growth in 2009. Officials are targeting a 22 percent reduction in new loans and have sold bills and raised banksâ€™ reserve requirements to suck money out of the financial system.
Slower Growth
â€œThe economy may continue to maintain relatively fast growth, but the growth rate may slow,â€ Zhang Liqun, a researcher at the State Councilâ€™s Development and Research Center, said in the statement from the logistics federation. â€œThe May PMI may be an indication that the economic rebound is stabilizing.â€
Munich-based BMW said on May 18 that itâ€™s sticking to its forecast of increasing 2010 earnings â€œsignificantly.â€ Carlos Ghosn, CEO of Nissan Motor Co., Japanâ€™s third-largest automaker, said last month he expects Chinese sales to increase 14 percent this fiscal year, outpacing North American deliveries.
â€œDemand has stabilized on a lower level,â€ Stefan Fuchs, CEO of Fuchs Petrolub AG, Germanyâ€™s largest maker of lubricants, said on May 3. â€œWe still donâ€™t know if this is just re- stocking. The question is if the recovery is sustainable.â€