China’s slowdown worsens as factories hit by fall in demand at home and abroad

China’s slowdown worsened in May as its factories saw a further deterioration in demand at home and abroad, dealing a new blow to a global economy struggling with a sharp downturn in Europe and a faltering recovery in the United States.

The darkening outlook was underlined by data showing the fourth monthly decline this year in exports from South Korea, the first major economy to report May numbers, as shipments to the United States, Europe and China all fell.

Equities, the euro and growth-linked currencies all fell after yesterday’s gloomy data, which followed reports on Thursday showing India’s growth at its weakest in nine years.

Manufacturing surveys from Europe later are not expected to offer much comfort, while investors’ jitters over the key US non-farm payrolls report, have been rising since a separate report on Thursday showed US private employers created fewer jobs than expected last month.

Declines in two gauges of China’s manufacturing sector were particularly worrying for investors looking to the world’s second biggest economy to pick up slack created by Europe’s debt crisis and the sluggish US economy.

China’s annual economic growth is expected to fall to 7.9% in the second quarter, the first dip below 8% since 2009.

“What’s really worrying is new orders have started to shrink and inventories have started to build up at an unusually fast pace,” said Dariusz Kowalczyk, senior economist and strategist at Credit Agricole CIB in Hong Kong.