U.S., EU business growth slow in May, China manufacturing contracts again

Euro zone business growth was weaker than expected this month and factory activity in Asia’s top two economies remained stuck in low gear, putting the onus squarely on the United States to drive a pick-up in global growth.

An absence of inflation pressures suggested Asian authorities could inject more stimulus if needed, while growth in the troubled currency union weakened just two months after the European Central Bank launched a 1-trillion-euro stimulus programme.

Meanwhile, the U.S. Federal Reserve has all but put to bed speculation it would tighten policy in June as the world’s biggest economy barely grew at the start of the year.

“The May (Purchasing Managers’ Index) surveys were broadly disappointing although nothing terribly bad,” said Richard Kelly, head of global strategy at TD Securities.

“There is no question the ECB is going to continue with quantitative easing up until September 2016. China is just starting the amount of additional liquidity and stimulus that will be needed to safely rebalance the economy.”

Markit’s Composite Flash PMI for the euro zone, based on surveys of thousands of companies and seen as a good growth indicator, fell to 53.4 from 53.9, missing the 53.8 predicted in a Reuters poll.

May marks the 23rd month above the 50 level that separates growth from contraction and Markit said the PMI pointed to 0.4 percent economic growth in the current quarter, matching the prediction in a Reuters poll this week. [ECILT/EU]

Demand from abroad for the bloc’s goods soared to a 13-month high as customers took advantage of a weaker euro making the products cheaper, prompting firms to recruit at the fastest rate in four years.

However, as in every month since late 2011, service firms cut their prices again, albeit only slightly. Euro zone prices were flat year-on-year in April, ending four months of falls, inflation data showed this week.

World shares hovered near all-time highs on Thursday after downbeat Chinese data but European markets opened largely subdued after the disappointing European numbers. [MKTS/GLOB]

The U.S. flash PMI, due later on Thursday, is expected to show a rise to 54.5 from 54.1, according to a Reuters poll.