Major Economics Slow Down in First Quarter of 2014

Major economies in Asia and Europe finished the first quarter on a weaker note, with key manufacturing surveys fuelling expectations policymakers may be forced to act in coming months to prop up faltering growth.

Factories across Europe eased back on the throttle in March while China’s vast manufacturing industry contracted for the third month, surveys showed, although a similar poll due later on Tuesday from the United States is expected to show a pick-up.

“The PMIs have given a steer on the Chinese economy for a while and it is looking like the People’s Bank of China will take some action,” said Philip Shaw at Investec.

“In the euro area they are tending to confirm that the recovery is taking place gradually, but that there is a broadening of the recovery.”

Output again rose across the board in the euro zone, suggesting its recovery is becoming entrenched, but Markit’s Purchasing Managers’ Index (PMI) also revealed that factories were once more cutting prices.

The bloc’s final manufacturing PMI came in at 53.0, matching an earlier flash reading but below February’s 53.2, while the output price sub-index dropped below the 50 mark that separates growth from contraction for the first time since August.

Euro zone inflation fell to just 0.5 percent last month, its lowest since November 2009 and well below the European Central Bank’s target of just below 2 percent.

The ECB is expected to keep monetary policy unchanged on Thursday despite calls for it to act to support growth. Olli Rehn, the EU’s top economic official, added to that pressure on Tuesday, saying prolonged low inflation would make it harder to correct imbalances in the euro zone.

Unemployment in the bloc declined slightly in February, although it remained at 11.9 percent, the European statistics office Eurostat said on Tuesday.

Growth in British manufacturing unexpectedly eased to its slowest pace in eight months and prices paid by factories tumbled, giving the Bank of England scant reason to adjust its loose policy stance.

World stocks got off to a solid second-quarter start on Tuesday after reassuring noises from Federal Reserve Chair Janet Yellen while major currencies and bonds looked set for more cautious jockeying ahead of the ECB meeting and U.S. jobs data.

via Reuters

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza