Manufacturing data hits world stocks

Shenzen factory workers China is a manufacturing powerhouse for the world economy

Disappointing manufacturing reports from China and Europe have worried investors, raising concerns over the strength of the global recovery.

World stock markets fell on Thursday following data showing that pace of growth in Chinese manufacturing slowed in June.

Meanwhile the eurozone also reported its second successive monthly fall in manufacturing growth.

European stock markets closed down between 1.8% and 3% following the news.

In the US, the Dow Jones Industrial Average also fell in early trading.

Austerity impact

In China, the Purchasing Managers' Index (PMI), which measures manufacturing growth, fell to 52.1 in June from 53.9 in May.

Observers said the data suggested that the faltering global recovery was affecting China's output.

"The Chinese economy is cooling down, and the export and import sector is the first to feel the pinch," said He Yifeng, an analyst with Hongyuan Securities in Beijing.

A separate survey on China, compiled for HSBC, showed a steeper fall to a 14-month low of 50.4 from 52.7 in May. Anything above 50 shows an expansion.

Start Quote

The eurozone's manufacturing upturn may now be flagging”

End Quote Howard Archer Chief European economist at IHS Global Insight

Manufacturing growth in other parts of Asia also slowed, with India's rate of growth down from a two-year high and South Korean manufacturing growing at its slowest rate in six months.

In Europe, the PMI measure for the eurozone also fell, raising fears that fiscal tightening measures may already be hitting demand.

The UK appears to be faring slightly better, though manufacturing is still growing slower than in May.

Meanwhile in the US, the Institute for Supply Management said its index of national factory activity showed a slowing in US manufacturing.

The European figures were of particular concern to analysts.

"The second successive drop in the PMI in June suggests that the eurozone's manufacturing upturn may now be flagging," warned Howard Archer, chief European economist at IHS Global Insight.

"This could be partly due to inventory corrections drawing to a close in some countries.

"But it may also be a sign that the eurozone debt crisis and an associated intensified tightening of fiscal policy in a number of countries is having a dampening impact on economic activity."

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