Global Economy Steadies but Europe Remains a Weak Spot
December 16 2019 - 8:09AM
Dow Jones News
By Paul Hannon
The global economy seems likely to avoid a further slowdown next
year, with a raft of supportive government policies lifting
activity in China and the U.S. still on a robust path.
However, Europe remains a weak spot, according to surveys of
purchasing managers released Monday, with few signs that a long
decline in manufacturing is nearing its end.
Global economic growth steadied in the three months through
September, as output in the Group of 20 leading economies expanded
at the same rate as in the second quarter. But while there are
signs the Federal Reserve's rate cuts earlier in the year have
helped to keep the U.S. economy on a robust growth path, the
European Central Bank's more recent efforts have had a less
noticeable impact.
Figures released Monday by China's National Bureau of Statistics
showed industrial output for November was 6.2% higher than a year
earlier, accelerating from a 4.7% year-over-year increase in
October. According to a separate release, China's retail sales
climbed 8% in November from a year earlier, compared with October's
7.2% increase.
After the release of the data, economists at UBS and Oxford
Economics raised their forecasts for 2020 Chinese economic growth
to 6%, up from earlier predictions for 5.7% growth.
But many economists remain cautious about the sustainability of
any improvement in China's economy.
"The current international environment remains complicated and
the economy still faces downward pressure," said Fu Linghui, a
spokesman for China's statistics bureau.
There are fewer questions about the current state of the
eurozone economy, which continues to flirt with stagnation. Surveys
of purchasing managers across the eurozone Monday pointed to a
sharper decline in the export-oriented manufacturing sector in
December, offset by a slightly stronger expansion in the more
domestically focused services sector.
Data firm IHS Markit's composite Purchasing Managers Index for
the currency area -- a measure of private sector activity -- was
unchanged at 50.6, pointing to meager growth. Over the three months
of the year's final quarter, the PMIs were the weakest since 2013,
when the currency area was starting to emerge from its twin
government debt and banking crises.
"The eurozone economy closes out 2019... with businesses
struggling against the headwinds of near-stagnant demand and gloomy
prospects for the year ahead," said Chris Williamson, chief
business economist at IHS Markit.
Eurozone factories have seen their overseas sales slow sharply
since early 2018, partly reflecting a global cooling of trade
linked to an exchange of tariff increases between the U.S. and
China.
The ECB's economists Thursday lowered their economic growth
forecast for next year to just 1.1%, the latest in a series of
downgrades that stretches back to June 2018.
However, ECB President Christine Lagarde gave no indication that
policy makers are considering another round of stimulus measures to
follow those announced in September, instead pointing to "some
initial signs of stabilization."
"What I think gives us some hope... is the fact that those
downside risks that we had on the horizon are less pronounced," she
said.
The surveys were completed before there were signs Friday that
Ms. Lagarde's assessment of the risks facing the eurozone may turn
out to be correct. On that day, the U.S. and China announced a
truce in their year-and-a-half-long dispute, while the result of
the U.K.'s election eased some uncertainty about the way in which
the country will leave the European Union.
In the U.K., a similar survey of purchasing managers pointed to
another month of declining activity, led by the sharpest
contraction in manufacturing since July 2012.
According to Duncan Brock, group director at the Chartered
Institute of Procurement & Supply, that decline reflected a
reluctance among businesses to make new investments ahead of the
election and the message it would send about the likely shape of
Brexit.
But he warned that the vote hasn't removed all the uncertainties
that face businesses.
"The Brexit path is still littered with obstacles and the need
for strong negotiation skills for a future EU agreement will be
paramount to avoid this downward slide becoming the economic
landscape for an extended period," said Mr. Brock.
In Japan, surveys of purchasing managers pointed to stagnation
in December, following a similar outcome in November. However,
Prime Minister Shinzo Abe's government earlier this month approved
a $120 billion stimulus program, Japan's largest in more than three
years, citing the same global economic risks that have led central
banks in the U.S. and Europe to cut interest rates.
--Grace Zhu, Liyan Qi and
Bingyan Wang
Write to Paul Hannon at paul.hannon@wsj.com
(END) Dow Jones Newswires
December 16, 2019 07:54 ET (12:54 GMT)
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