People walk by a store holding a clearance sale at a shopping district in Madrid, Spain, March 3, 2016. REUTERS/Andrea Comas
LONDON: Global business activity expanded at its weakest rate in over three years last month despite firms cutting prices for the first time since September, a survey showed on Thursday.
JPMorgan’s Global All-Industry Output Index, produced with Markit, slumped to 50.6 in February from January’s 52.6, its lowest reading since October 2012 when it nudged above the 50 mark that divides growth from contraction.
“February’s PMI surveys further highlight the broad-based weakness in global growth during the opening quarter of 2016,” said David Hensley, a director at JPMorgan.
“The PMIs point to sluggish output gains in both the manufacturing and service sectors, while the upturn in new business softened.”
The output price index registered 49.7, down from January’s 50.1 but discounting failed to stop a deceleration in new orders.
A PMI covering the service industry fell to a 40-month low of 50.7 from 52.8. A sister survey on Tuesday showed global manufacturing growth stagnated in February.
The global PMIs combine survey data from countries including the United States, Japan, Germany, France, Britain, China and Russia.
The final Markit Composite PMI for the euro zone, seen as a good guide to growth, slipped to 53.0 last month from January’s 53.6, its lowest reading since the start of 2015. That was above a preliminary reading of 52.7 and still over the 50 mark that denotes growth.
In Britain, the Markit/CIPS services PMI slid to 52.7 from 55.6, the weakest reading since March 2013 and worse than all the forecasts in a Reuters poll of economists, which produced a median forecast of 55.1.
It was the first time Markit had cited as a factor in business expectations a June 23 referendum on whether Britain should quite the European Union. That prospect may be one reason BoE policymakers say they will boost the economy if necessary.
“Should it vote to leave, then the near-term growth backdrop will deteriorate even further, which will likely result in renewed Bank of England policy stimulus,” said James Knightley at ING.
News from Asia was no better. Growth in India’s services industry slowed and reached a seven-month low in Japan. Activity contracted in Hong Kong for a 12th month.
Meanwhile, Chinese results suggest a prolonged slowdown in the world’s second-largest economy and in its manufacturing is starting to drag on services.
Their activity slowed, adding to risks for policymakers, who are counting on robust services growth to offset a planned overhaul of bloated state companies.
He Fan, chief economist at Caixin Insight Group, said further government measures were need to boost services and improve balance in the economy.
“While implementing measures to stabilise economic growth, the government needs to push forward reform on the supply side in the services sector to release its potential,” He said. - Reuters
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