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Slowdown in economic giants fuels growth fears
Manufacturing activity in the world's two largest economies, the US and China, slowed in April, signalling weakening demand and casting doubt on global recovery.

While growth in the manufacturing sectors of both economic giants slowed in April, the slowdown was particularly sharp in the US.

The Institute for Supply Management (ISM) in the US said its index of national factory activity slowed to 50.7 in April from 51.3 in March. While any reading over 50 signals the sector is in expansionary territory, the sudden drop highlights some fragility in the economy.

Another gauge of US manufacturing by financial data firm Markit released on Wednesday also reported a stark slowdown, falling to 52.1 in April from March's 54.6.

Chris Williamson, economist at Markit, described the US manufacturing slowdown as a "spring swoon" following a strong first quarter, largely driven by a sudden drop in demand in the domestic market.

"Manufacturers had reported the best quarter for two years in the first three months of the year, but a steep downturn in growth of orders in April suggests that this impressive performance could be short-lived. Firms have responded quickly to weaker growth of orders by limiting growth of both output and employment," he said.

He added that Wednesday's data, which came alongside a separate report showing that April saw the slowest jobs growth in the US private sector in seven months, was likely to prevent the US Federal Reserve from moving from its stimulus-focussed monetary policy.

"The combination of slowing growth and a lack of inflation will add to the growing number of reasons why Fed talk will move away from when to curb its stimulus, and instead focus on what more it might do to help keep the recovery alive," said Mr Williamson.

However the data were not without some bright spots, showing an ongoing growth of export orders, which Mr Williamson said should help restrict the adverse impact of weaker domestic demand, and a further easing of inflationary pressures.

Meanwhile in China, the index of manufacturing activity dropped 50.6 in April, down from 50.9 the month before, according to official data from the National Bureau of Statistics and the China Federation of Logistics and Purchasing (CFLP).

"The April PMI index fell slightly, indicating that the foundation for economic stabilisation is still not solidified," analyst Zhang Liqun said in a CFLP statement.

"A slight slowdown in economic growth is possible," he said, adding that "effort should be made to stabilise domestic consumption, and increase the sustainability of the stabilisation of the economy".

A separate measure of manufacturing activity by HSBC, whose survey focuses more on smaller enterprises, said last week that its preliminary index for April stood at 50.5, also down from a final reading of 51.6 in March. The preliminary result came in lower on the back of decreasing new export orders and employment, according to the bank, which is set to release its final reading on Thursday.

China's latest manufacturing figures will add to fears that the country's economic cooling will spill over into the second quarter.

While China's own growth target for 2013 stands at a modest 7.5pc, global forecasters keenly expect a rebound for the world's second biggest economy after growth slowed to its slowest pace in 13 years in 2012, at 7.8pc.

Analysts had hoped the Chinese economy would rebound this year and drive growth globally, but the government in mid-April announced a surprisingly weak economic growth rate of 7.7pc for the first quarter, below market expectations and fuelling fears the recent pick-up is faltering.

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