Kathryn Hopkins Economics CorrespondentGlobal markets fell sharply yesterday after a barrage of gloomy data heightened fears that several leading economies are in danger of tipping back into recession.
Just days after the International Monetary Fund warned policymakers in America and Europe to take immediate action to ward off the threat, official figures showed that the eurozone’s private sector economy shrank for the first time in two years in August.
The Flash Markit Eurozone Services PMI, which measures activity at thousands of businesses from banks to restaurants, dropped to 49.1 in September, from 51.5 the previous month.
Concerns about a global downturn were heightened when HSBC’s China Flash PMI showed that manufacturing activity contracted for the third successive month in September, pointing to a slowdown in the world’s second-largest economy.
China’s PMI fell to 49.4 in September, from 49.9 in August. That was the first time since August 2009 that the index had fallen below the 50 mark that divides growth from contraction.
In Britain the FTSE 100 ended the day down 4.7 per cent, or 246.80 points, at 5,041.61. European markets suffed similiar falls, with Germany’s DAX shedding 4.96 per cent and France’s CAC 40 losing 5.25 per cent.
The data was just as gloomy for Europe’s manufacturing sector, which ministers had hoped would drive the recovery. Its index dropped from 48.5 in August to 48.4 this month — the lowest level in two years.
The Flash composite PMI, which combines the services and manufacturing data and is often used as a guide to growth, fell to 49.2, its first contraction since July 2009.
Meanwhile, new orders in the 17 eurozone countries fell by 2.1 per cent in July compared with June, deeper than the 1.1 per cent fall forecast by a Reuters poll of economists. Consumer confidence in the bloc fell to a 2½-year low.
The worse than expected eurozone data will pile further pressure on the European Central Bank to use its policy tools to boost growth as the Continent’s debt crisis threatens to engulf more victims.
Piero Ghezzi, head of economics at Barclays Capital, warned that there was a one in five chance that “European authorities fail to contain the situation and that a second major financial crisis and recession ensue”. If this happens, he said, “no country will be spared”. “Even in the likelihood that disaster is avoided, the eurozone faces a long slog rather than a rapid rebound back from the brink,” he said.
The figures were just as miserable in Britain. The CBI’s Industrial Trends Survey showed that British factory orders fell by more than expected in September as the troubles in the global economy dampened overseas demand at the fastest pace in almost a year.
“The [survey] shows a marked deterioration in the readings for overall order books, output expectations and export orders, with the export order series now at the lowest since October last year,” Michael Saunders, an economist at Citigroup, said. “Despite the boost from the low pound, this survey suggests export growth will weaken further in coming months as the slowdowns in the euro area and US hit.”
