China economy still struggling but firms in eurozone positive

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Chinese factory activity shrank for the fourth straight month in April but private businesses across the eurozone enjoyed their best month in nearly three years, surveys showed.

However, within the eurozone, France, the bloc’s second biggest, momentum waned.

“Given the problems the eurozone faces, to get even a modest rate of positive growth this year is a good sign. But there is an increasing concern that two of the larger economies – Italy and France – are struggling to gain any traction,” said Peter Dixon at Commerzbank.

Beijing has introduced policy steps to arrest the slowdown in the world’s second biggest economy and the pace of decline did moderate this month.

The HSBC/Markit flash Purchasing Managers’ Index (PMI) for April rose to 48.3 from March’s final reading of 48.0, but was still below the 50 line separating expansion from contraction.

“It’s generally in line (with expectations), reflecting that growth momentum is stabilising,” said Zhou Hao, China economist at ANZ in Shanghai.

Hao expected annual economic growth to pick up slightly to 7.5 per cent in the second quarter after it slowed to 7.4 per cent in the first from a year earlier, its slowest reading in 18 months. Manufacturers in the world’s biggest economy of the United States also picked up the pace this month.

European shares edged down yesterday after three days of gains after the Chinese data offset broadly reassuring European numbers.

The eurozone’s private sector started the second quarter on its strongest footing in nearly three years, but burgeoning new orders were again mainly buoyed by firms cutting prices.

Topping expectations of all 36 economists polled by Reuters, the bloc’s dominant services industry led the charge while manufacturers also had a stronger month than the median forecast had suggested.