|08-22-2014, 01:40 PM||#1|
Weakness in business activity in China and Europe adding concerns about global recovery
August surveys showed that business growth in Europe and China slowed, adding more concerns about the future of global recovery. The global economy may need further stimulus measures to be introduced in order to lift demand levels and push business activity forward.
The composite Flash PMI dropped to 52.8 in August compared with 53.8 back in July, while analysts` estimates referred to 53.4.
Manufacturing activity in the world`s second largest economy dropped this month, signaling more challenges standing against Prime Minister Li Keqiang to realize the targeted growth of 7.5%. The preliminary reading of China`s HSBC manufacturing Purchasing Managers` index (PMI) came in at 50.3 in August compared with a previous 51.7, while analysts` estimates referred to 51.5.
Yet, stimulus measures added since April pushed China`s annual economic expansion to 7.5% in the second quarter, inline with the government`s target, from 7.4% in the first quarter, the slowest pace in 18 months. The central bank is studying adding more monetary stimulus to maintain the seen growth rate till the end of this year.
On the other side, private business activity in Europe expanded less than forecasts in August, despite the price cutting, before the effects of sanctions imposed on Russia take place. Economists expect the European central bank not to add new economic stimulus in the coming period; however, it will only monitor the situation.
The Federal bank also announced earlier that it ended its stimulus programs, and emphasized on monetary easing in the coming period with keeping interest rate at its record low to support the American economy. This policy is too close to the one seen in China and Japan as well, so seeing new stimulus packages may be hard till the end of this year.
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