Fears grow for health of global economy

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Surveys sounded warning bells for the global economy yesterday as eurozone businesses grew less quickly than any forecaster expected, and China and US factories lost momentum.

The downbeat data, alongside evidence of further price-cutting, will add to calls for more policy action from the European Central Bank, while the first drop in Chinese manufacturing output for six months will heap similar pressure on authorities in Beijing.

“It does reinforce the case for quantitative easing from the European Central Bank,” said Alan Clarke, European economist at Scotiabank, of the eurozone PMIs.

Markit’s Composite Flash Purchasing Managers’ Index for November, based on surveys of thousands of companies and seen as a good growth indicator, fell to 51.4, missing even the lowest forecast in a Reuters poll.

The service industry PMI also undershot all forecasts by falling to 51.3, while the factory PMI’s dip to 50.4 missed consensus. However, all three readings held above the 50 mark that separates growth from contraction. Markit said the PMI pointed to 0.1-0.2 per cent GDP growth in the eurozone in the current quarter, compared with the 0.2 per cent forecast.

“November’s fall in the eurozone composite PMI is a serious blow to hopes the recovery would resume towards the end of the year,” said Jennifer McKeown, senior European economist at Capital Economics.