Global factories hit hard

London/Sydney - China contracts further; eurozone factories cut prices sharply

Manufacturing activity across much of Asia shrank in February while factory growth waned throughout Europe, dealing a further blow to policymakers who are struggling to stimulate their economies and spur inflation.
Chinese producers suffered a seventh straight month of decline in February, a Purchasing Managers' Index (PMI) survey showed just a day after the People's Bank of China resumed a policy easing cycle in a fresh effort to drive growth.
Sister surveys showed factories in the eurozone raised production at the weakest pace for a year as deep discounting failed to put a floor under slowing orders growth. Their British counterparts had their worst month in nearly three years.
British factories had their weakest month in nearly three years in February, a survey showed on Tuesday, raising a warning signal that the country's recovery from the financial crisis could be slowing further.
A survey of manufacturing output from the United States is likely to show a fifth straight month of contraction there. None of the 88 economists polled by Reuters expected growth.
"If you were looking for evidence of manufacturing growth stabilising then this isn't it. There were a couple of low spots that are quite surprising," said Philip Shaw at Investec.
"(But) to get a fuller picture of what is going on we will have to see evidence from the service sector." Monthly service industry PMI surveys are due later this week.
Tuesday's downbeat data may sharpen the focus of officials from the world's leading economies who declared at a weekend G20 meeting they needed to look beyond ultra-low rates and printing money to reanimate growth.
On Monday, the PBOC announced it was cutting the amount of cash banks must hold as reserves for the fifth time since February 2015 yet analysts expect it will have to do more, including cutting interest rates this year.
The eurozone has been facing similar travails and although the overall expansion was slightly better than previously thought, Markit's manufacturing PMI will make gloomy reading for the European Central Bank ahead of next week's policy meeting.
The survey showed factories cut prices at the steepest rate since mid-2013. The ECB wants inflation near two per cent but prices across the bloc fell 0.2 per cent last month, short of already depressed expectations and virtually ensuring another round of policy easing.
An additional cut to the ECB's deposit rate is almost certain on March 10 and there is an even chance the central bank will increase the size of its ?60 billion a month bond buying programme, a Reuters poll found last month.
Australia's central bank governor, Glenn Stevens, observed on Tuesday that conditions have become more difficult for a number of emerging market economies and noted "China's growth rate has continued to moderate".Markit's manufacturing PMI for the eurozone dropped to 51.2 from January's 52.3. That was slightly better than an earlier flash estimate of 51.0 and above the 50 mark that separates growth from contraction.
German manufacturing plunged to a 15-month low of 50.5 from January's 52.3.
Japan's factories saw their weakest growth in eight months, while Indonesia and Malaysia contracted for the 17th and 11th month respectively, according to Markit. Taiwan went into reverse gear for the first time in three months as orders wilted.
India was perhaps the only standout, and for merely maintaining modest growth driven by cutting prices to attract demand.