China's giant manufacturing industry contracted while British and eurozone growth eased in August, rattling markets and reinforcing expectations interest rates may fall again or stay near zero for longer.
Manufacturers across the world struggled, a series of surveys showed on Tuesday. It came as the People's Bank of China loosened policy for the second time in two months last week and amid 60 billion euros ($67.50 billion) a month of European Central Bank stimulus.
World stocks and commodity prices fell as the poor Chinese data intensified already rampant fears about its economic health.
A survey due later from the United States is expected to show a slowdown in factory growth in the world's largest economy at a time when markets are focusing on whether the Federal Reserve hikes rates for the first time in almost a decade this month.
"It's all consistent with a global economy which clearly is struggling to make any significant headway," said Peter Dixon at Commerzbank.
"As a consequence central banks which are thinking about raising interest rates in the near future will be looking at these numbers and it will maybe give them a little pause for thought."
Denting hopes of a pick-up in the second half of the year as Asia tries to fire its traditional growth engine of exports, the Chinese government's measure of manufacturing showed activity contracted at the fastest pace in three years.
A similar survey by Markit, which focuses more on smaller, private firms, showed the factory sector's weakest performance in 6-1/2 years.
Even China's services sector, which has been one of the few bright spots in the sputtering economy, showed signs of cooling, expanding at its slowest rate in more than a year, Markit said.
"Today's reading suggests that manufacturing activities in China remain weak. We now expect GDP to grow by an annual 6.4 percent in the third quarter," ANZ economists said.
China's data may have been affected by the closure of factories to clear Beijing's polluted skies for a military parade this week and the impact of a giant blast at the port city of Tianjin.
But the figures will worry investors, already scarred by the near-40 percent plunge in the country's stock markets since mid-June and a surprise Aug. 11 yuan devaluation.
"Weakness in data across the board suggests the downward pressure to the economy is probably not only being driven by temporary distortions," Credit Suisse analysts said in a report.
Other surveys by Markit showed manufacturers struggling across Asia: an 11th successive contraction in Indonesia, a sixth contraction in South Korea and the weakest reading in nearly three years in Taiwan. Activity in India also slowed from July, although it was still expanding.
Japan was an outlier, with its manufacturing growth picking up pace with the strongest reading in seven months. That reinforced expectations the economy will rebound from a second-quarter contraction.
In a sign of slowing global demand, exports from South Korea dropped nearly 15 percent in August from a year earlier, with shipments to China, the Unite State and Europe all weaker, a trend HSBC's Frederic Neumann called worrisome for the global trade cycle.
"The country, after all, has long been a reliable bellwether. Korea's PMI is still negative, and new export orders again contracted, even if at a less rapid pace than before," Neumann, co-head of Asian Economics research, said.
ECB TO EXTEND QE?
Eurozone manufacturing growth eased last month, despite factories barely raising prices, adding to the ECB's woes as it battles to spur expansion and inflation.
Tuesday's disappointing readings come almost half a year after the ECB began pumping 60 billion euros a month of fresh cash into the economy and a day after official data showed inflation in the 19-country bloc at just 0.2 percent.
With inflation so far below the ECB's 2 percent target ceiling there is a growing chance the ECB will have to extend its stimulus program beyond the planned completion in September 2016.
In one bright spot, unemployment in the euro zone unexpectedly fell to its lowest level in more than three years in July, official data showed.
However, a two-year spell of jobs growth across British factories came to an end last month as manufacturing activity expanded at a slower pace, suggesting the sector is unlikely to boost economic growth much there this quarter.
"Sterling's appreciation and the continued sluggishness of the euro zone economy's recovery suggest that a sustained revival in the export-orientated manufacturing sector will remain a distant prospect," said Samuel Tombs at Capital Economics.
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