Manufacturing Data Hints at QE’s Inability to Boost Growth

Massive monetary stimulus from Chinese and European central banks has done little to spur factory growth, moving a debate over more easing up the agenda and raising doubts over whether U.S. interest rates will rise this year.

A crop of industry surveys out on Monday pointed to October as another subdued month. Activity in China’s colossal factory sector shrank as global demand stuttered while euro zone factories again resorted to slashing prices to drum up trade.

“We do think there is more easing to come in China. They are in the midst of a long-running easing cycle that is probably going to go on until late next year,” said Andrew Kenningham at Capital Economics.

“The ECB is likely to announce something further in December. The concerns there are not so much about growth but about the prospects for inflation.”

More than half a year after the ECB started pumping in 60 billion euros a month of new money through its quantitative easing program, the currency bloc’s relatively downbeat manufacturing survey may make disappointing reading for policymakers.

The central bank has failed to lift inflation anywhere near its target of just below 2 percent, and data on Friday showed prices were unchanged last month, heaping more pressure on the bank to act.

It was already almost certain the ECB would ease monetary policy in December, increasing or extending its stimulus program and further cutting the deposit rate, a Reuters poll of economists taken ahead of the inflation data found.

via Reuters

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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