The global economy finished last year on a fragile footing, with factory activity in China shrinking for the 10th month running in December while a pick-up in the euro zone was tepid, suggesting more policy stimulus may be in the pipeline.
Coming on a day of turmoil in Asian stock markets after China’s central bank fixed the yuan at a 4-1/2 year low, the data point to a further dose of the sluggish growth and inflation, weak demand and jittery financial markets that characterized 2015.
Mainland Chinese shares sank over 7 percent on the lower yuan fixing and shrinking factory activity.
European stock markets fell too, though the declines were less sharp as investors took note of the brighter data from the euro zone.
Manufacturing activity in the single currency area improved last month in all the countries covered by a business survey, suggesting factories performed better over last year as a whole compared to the previous three.
Markit’s final manufacturing Purchasing Managers’ Index rose to a 20-month high of 53.2, just above a flash reading of 53.1 and of 52.8 in November. The PMIs suggest a pickup in activity, but in most countries still a mild pace of growth.
This year “is going to be a rerun of 2015 with added risks,” said Peter Dixon, economist at Commerzbank. “The global economic story is based on weak fundamentals with China slowing further and policy uncertainties existing in developed economies.”
While the PMIs point to improving activity in the euro zone, the European Central Bank…