Global economy less robust than thought

Business activity weakened in China and Japan in April and growth slowed in Europe and the US, suggesting the global economy may be less robust than policymakers are predicting.

In China, where the government has been engineering a rebalancing of its economy towards domestic spending and away from reliance on exports of manufactured goods, the preliminary purchasing managers’ index (PMI) fell to a one-year low of 49.2 from 49.6, according to data from HSBC/Markit. Economists polled by Reuters had expected it to remain steady. An index reading below 50 suggests contraction in the sector.

Analysts at Japanese bank Nomura said the Chinese data underscored their forecast for two more 50 basis point cuts in the reserve requirement ratio for Chinese banks, and three more 25 basis point interest rate cuts this year.