* Euro zone, British factory PMIs dip
* China, Indonesia manufacturing PMIs hit multi-month lows
* Japan business outlook weaker as sales tax rises
By Jonathan Cable and Adam Rose
LONDON/BEIJING, April 1 Major economies in Asia
and Europe finished the first quarter on a weaker note, with key
manufacturing surveys fuelling expectations policymakers may be
forced to act in coming months to prop up faltering growth.
Factories across Europe eased back on the throttle in March
while China's vast manufacturing industry contracted for the
third month, surveys showed, although a similar poll due later
on Tuesday from the United States is expected to show a pick-up.
"The PMIs have given a steer on the Chinese economy for a
while and it is looking like the People's Bank of China will
take some action," said Philip Shaw at Investec.
"In the euro area they are tending to confirm that the
recovery is taking place gradually, but that there is a
broadening of the recovery."
Output again rose across the board in the euro zone,
suggesting its recovery is becoming entrenched, but Markit's
Purchasing Managers' Index (PMI) also revealed that factories
were once more cutting prices.
The bloc's final manufacturing PMI came in at 53.0, matching
an earlier flash reading but below February's 53.2, while the
output price sub-index dropped below the 50 mark that separates
growth from contraction for the first time since August.
Euro zone inflation fell to just 0.5 percent last month, its
lowest since November 2009 and well below the European Central
Bank's target of just below 2 percent.
The ECB is expected to keep monetary policy unchanged on
Thursday despite calls for it to act to support growth. Olli
Rehn, the EU's top economic official, added to that pressure on
Tuesday, saying prolonged low inflation would make it harder to
correct imbalances in the euro zone.
Unemployment in the bloc declined slightly in February,
although it remained at 11.9 percent, the European statistics
office Eurostat said on Tuesday.
Growth in British manufacturing unexpectedly eased to its
slowest pace in eight months and prices paid by factories
tumbled, giving the Bank of England scant reason to adjust its
loose policy stance.
World stocks got off to a solid second-quarter start on
Tuesday after reassuring noises from Federal Reserve Chair Janet
Yellen while major currencies and bonds looked set for more
cautious jockeying ahead of the ECB meeting and U.S. jobs data.
In China, the final Markit/HSBC PMI gauge of factory
activity fell to an eight-month low of 48.0 in March. It has
remained below the 50 level since January.
The official survey, which is geared towards bigger,
state-owned firms, showed a marginal increase to 50.3 from 50.2.
But economists warned that given seasonal patterns this was
a sign of further weakness rather than improvement in the
world's second-biggest economy.
"Overall, both March PMI readings further underpin the weak
start to the year experienced by the Chinese economy. They also
increase the pressure on the Chinese authorities to stimulate
the economy," said Nikolaus Keis, an economist at UniCredit.
Investors are betting China will try to arrest the loss of
momentum after what has shaped up to be its worst quarter in
Last week, Premier Li Keqiang said Beijing had the necessary
policies in place and would push ahead with infrastructure
investment, after recent weak economic data and mounting signs
of financial risks clouded the nation's outlook.
In Japan, the closely watched central bank tankan survey
showed business sentiment barely improved in the three months to
March and was set to sour this quarter following an increase in
sales tax that took effect on Tuesday.
The tax increase is taking a bigger toll on corporate
sentiment than the previous hike in 1997, highlighting the
daunting challenge facing Prime Minister Shinzo Abe in his quest
to shore up government revenues while rescuing the country from
years of deflationary stagnation.
Big manufacturers and non-manufacturers in Japan expect
conditions to worsen in the three months ahead, keeping alive
expectations the Bank of Japan will boost its massive monetary
stimulus to sustain recovery in the world's No. 3 economy.
Japan's Markit/JMMA Manufacturing PMI pulled back further
from January's eight-year high as heavy snow in some areas
"The chance of further BOJ easing may have risen a bit but
the tankan alone won't be a trigger for action. The bank will
probably wait to see more evidence on how much the tax hike
actually hurts demand," said Yoshiki Shinke, chief economist at
Dai-ichi Life Research Institute.
Factory PMI surveys for Asia's third and fifth-largest
economies India and Indonesia also came in softer, with India's
index still in growth territory, but Indonesia's hitting a
However, South Korea, Asia's fourth-largest economy and one
of its leading manufacturing and export powerhouses, managed to
buck the trend - its HSBC/Markit manufacturing gauge rose.
(Additional reporting by Andy Bruce in LONDON, Leika Kihara and
Tetsushi Kajimoto in TOKYO, Rieka Rahadiana in JAKARTA, Se Young
Lee in SEOUL, and Sarmista Sen in BANGALORE; Editing by