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Factories struggle as world demand splutters

Monday, August 01, 2016 - 01:38

Manufacturing growth across the euro zone eased in July and signs of a sharper slowdown outside powerhouse Germany may add to calls for the ECB to loosen policy again. As David Pollard reports, activity in China's manufacturing sector also eased unexpectedly.

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If Europe's been making heavy weather of its economic recovery, in China the problem's the real thing. Devastating floods one reason manufacturing contracted last month - its official PMI reading slipping below the 50 mark that denotes growth. While raising new doubts over the world's number 2 economy. SOUNDBITE (English) CHIEF ECONOMIST, WORLD FIRST, JEREMY COOK, SAYING: "We know they are meant to be rebalancing away from a manufacturing economy to something more service-driven but that's probably going to take at least a decade, at the very, very least. So it's not going to happen over the course of a couple of months, so they should still be looking for strong growth from the manufacturing sector, but simply put, it's just not there at the moment." The euro zone presents a more complex - or 'lop-sided' - picture, according to Markit, who compile the data. Germany still powering ahead - but Spanish growth slowing - and France contracting for the fifth straight month. Leaving the euro zone still positive - if down on the month. SOUNDBITE (English) CHIEF ECONOMIST, WORLD FIRST, JEREMY COOK, SAYING: "Any positivity there will be looked on with great relief. We're not seeing a pick-up in inflationary pressures, however, which will be the first thing the European Central Bank will be looking at - are we seeing prices rise and simply put, not at the moment." Nor, says Cook, is there much sign so far of a deep hit from Britain's Brexit vote - to a continent soon dusting off its own ballot boxes. SOUNDBITE (English) CHIEF ECONOMIST, WORLD FIRST, JEREMY COOK, SAYING: "Political risk kicks up in Q3 with the Italian elections and people getting reading for elections in The Netherlands and in Germany and in France over the next twelve months or so and that's going to definitely increase the Brexit risk, or the referred Brexit risk, through Europe." The ECB delivers its next policy decision on September 8th - analysts see the door to further monetary policy easing as still very much open.

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Factories struggle as world demand splutters

Monday, August 01, 2016 - 01:38