World Factory Output Curbed by Troubled Europe

As reported by Jonathan Cable and Anooja Debnath from Reuters, crumbling global demand restrained factory output in Asia and most of Europe in January, business surveys showed on Wednesday, putting pressure on policymakers to shore up growth and counter a spreading malaise.

Asia‘s export-reliant countries, while far more resilient, remain vulnerable to the euro zone’s messy sovereign debt crisis that threatens at best to tip the currency bloc into a recession and at worst to rip it apart.

Meanwhile, the first rise in German manufacturing output in four months was not enough to offset prolonged contraction in the currency union’s smaller economies and suggests that the bloc will not avoid that recession.

“There is an awful long way to go yet, and given the headwinds that these economies face I would be cautious about being too optimistic,” said Peter Dixon at Commerzbank.

“Germany continues to motor on and show a reasonable amount of dynamism, and that will drag France along and maybe Italy, but it is not really going to help the likes of Greece. You need much more buoyancy from domestic demand, which at the moment appears to be sadly lacking.”

The Eurozone Manufacturing Purchasing Managers’ Index (PMI), compiled by Markit, rose to 48.8 last month from 46.9, revised up from a flash reading but recording its sixth month below the 50 mark that divides growth from contraction.

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