Europe’s slump deepens

The shadows over the global economy darkened this month as the eurozone’s private sector contracted, US manufacturing growth slowed and China’s once-booming factories faltered, surveys showed on Thursday. In Europe, a downturn that started in smaller states on the eurozone’s periphery is now taking root in the core countries of Germany and France, where tepid growth had been the main ballast of support for the euro area economy. “We are very much in a period of weakening global growth. It doesn’t quite feel like 2008 yet but the danger is we could get there quicker than we think,” said Peter Dixon at Commerzbank. The eurozone composite PMI, comprising the services and manufacturing sectors, fell to 45.9 from April’s 46.7, its lowest reading since June 2009 and its ninth month below the 50-mark that divides growth from contraction. Financial information firm Markit’s “flash” US manufacturing Purchasing Managers Index slipped to 53.9 in May from 56.0, with slower export sales sapping momentum. Markit, which also compiles the eurozone PMIs, released its US index for the first time on Thursday but has been tracking data in the entire sector since late 2009. HSBC’s Flash China PMI, the earliest indicator of China’s industrial sector, retreated to 48.7 in May from a final reading of 49.3 in April. It marked the seventh straight month that the index has been below 50. The figures signal that the sluggish economic conditions of the first quarter are set to continue throughout the first half of the year in China’s longest slowdown since the global financial crisis. The HSBC PMI has provided a contrast to the Chinese government’s official PMI, which includes more state-owned firms with better access to credit. The government PMI hit a 13-month high of 53.3 in April as exports ticked higher although domestic orders showed signs of weakness. Manufacturing has been a bright spot for the US economy, with the Markit index showing the sector has expanded for 32 straight months. The US PMI index’s average reading in 2011 was 54.3. But as the pace of hiring across the economy has slowed in recent months, economists worry about whether demand will hold up this summer. Separate data showed orders for long-lasting US durable goods rose less than expected as firms scaled back plans to add machinery and the military ordered fewer aircraft. Meanwhile, first-time applications for US jobless benefits fell slightly in the latest week, the Labour Department said. In Europe, even the core countries are running into trouble. The manufacturing sector in Germany  contracted at a far greater pace than was expected, and its service sector saw minimal growth. In France, both sectors contracted faster than predicted by most economists.