March 5, 2021

Surveys Indicate Slower Growth in China and Germany

The data do not yet point to a recession in the fragile euro zone, economists said, and indicate only a moderate cooling of torrid Chinese growth. And several analysts noted that the economic indicators were actually less negative than many had expected. Nonetheless, it has become increasingly clear that Europe cannot expect to grow its way out of the sovereign debt crisis, which has become a weight on the world economy.

“A return to recession is possible,” Marie Diron, an economist who advises the consulting firm Ernst Young, wrote in a note, referring to the European data. “This is bad news for governments’ ability to rein in public deficits.”

Germany has Europe’s most powerful economy, and has been helping the euro zone to grow despite the burden caused by excessive debt in countries like Greece and Italy. China is a crucial market for German machinery and cars, so a slowdown there will also be felt in Europe.

While not expecting a recession, Violante Di Canossa, an analyst at Credit Suisse, wrote in a note that the data “remains consistent with sluggish growth.” She said that the industrial survey for Europe pointed to a slowdown similar to the one in 2003, when there were several quarters of minimal economic improvement, rather than a sharp downturn.

A survey of manufacturers in China showed Tuesday that factory activity had probably contracted slightly in August, as concerns mounted that the country’s exports might decline because of high debts and slowing economies in Europe and the United States. The findings underpin the widely held perception that the giant Chinese economy is growing at a more moderate, yet still robust, pace.

The findings of the poll of Chinese purchasing managers, published by HSBC and with a final figure due next week, showed a reading of 49.8 for August, a touch below the 50 mark that separates expansion from contraction, as Beijing’s efforts to cool down the pace of growth began to bear fruit.

For the past year and a half, Chinese policy makers have been working to rein in booming growth and the sharp price rises that have accompanied it. Formerly free-flowing bank credit has become harder to obtain, for example, as banks have been instructed to lend less.

Despite being below 50 for the second consecutive month, the HSBC index indicated that China’s economy remained on a firm footing. The August reading was an improvement from the 49.3 recorded in July, while a subindex measuring new export orders rose to a three-month high.

The data suggest that China will not suffer a hard landing akin to the sharp slowdown seen in late 2008, Qu Hongbin, a China economist at HSBC, wrote in a note Tuesday.

Meanwhile, a survey of purchasing managers’ expectations for output in the euro zone was unchanged at a nearly two-year low, according to preliminary estimates, but was not as bad as analysts had expected.

A separate poll of economists also showed a sharp deterioration in expectations for the euro zone and Germany.

Official statistics last week showed that growth in the second quarter came nearly to a standstill in the euro zone as well as in Germany and France, the region’s two largest economies.

Fear that Europe is headed for another slowdown, which would compound the sovereign debt crisis, was responsible for driving down stock markets last week. On Tuesday, by contrast, many of Europe’s main stock indexes gained for a second straight day.

A preliminary reading of the euro zone P.M.I. composite output index, compiled by Markit, an information provider in London, was unchanged from July at 51.1. The euro zone manufacturing P.M.I., a gauge of the mood among manufacturers, fell to 49.7 from 50.4 in July, a 23-month low. A reading below 50 suggests that the economy is stalling.

“This drop does not compare with the collapse seen in late 2008 after the failure of Lehman Brothers,” Christoph Weil, an economist at Commerzbank, wrote in a note. “Nevertheless, the purchasing managers’ index does confirm that the euro zone economy is hardly growing now.”

Ms. Diron of Ernst Young said the slowing growth exposed how vulnerable Europe and especially Germany were to foreign markets.

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