Incentives have Failed to Boost the Struggling Global Factories

There has been a huge amount of monetary incentives offered by Chinese and European banks to increase the factory production, but, it has failed to spur the production.

Indications of Industry Surveys

The massive monetary incentives offered by the Chinese and the European banks to the production and manufacturing sector have not been able to boost the growth of this industry. This has resulted in many thinking of offering more financial sops to this sector to boost the falling economy. The industry surveys point out that October was also a passive month for the production sector. The Chinese factory sector has seen very low activity in October as the global demand for its products have reduced. The European zone factories had resorted to reducing the prices in order to improve its trade.

China to Ease Agenda 

The analysts are of the opinion that China will be looking to ease its norms, even further and this will be going on for some time in the next year as well. There is no doubt that China will be going through a long easing cycle for its production sector. China is going through a big lull as far as economy is concerned and is seriously worried about whether the U.S. interests will increase this year.

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Euro Zone on the Same Wavelength

A similar approach will also be taken in the European Union. There is going to be a further announcement of easing on the agenda by the ECB in December. They are not concerned on the growth aspect, but their major concerns are about the inflation prospects. There is also a discussion about the Slowdown of the UK Economic Growth in a previous article that you can read by clicking on the link.

Central Bank Worries

The ECB has pumped in 60 billion Euros a month of solid finance through the quantitative easing program. But, even after half a year of this program, the downturn in the manufacturing survey has made it a really disappointing reading for all the policy makers. The central bank has not been able to raise the inflation to its proposed target of just below 2% and the prices have not seen a change last month. This will force the central bank to act soon and the pressure on it is also mounting.

There is no doubt that the central bank will ease its financial policy in December and it could increase or extend the stimulus package. There is also a chance for it to cut down the deposit rate further. The euro zone Purchasing Managers Index (PMI) read 52.3 last month, which was slightly better than what was seen in September. But, it is just lurking in the 50 mark that is showing a dent to the growth in the sector despite pumping up of funds and other stimulus programs.

The flat PMI suggests that the overall growth will also be very low or nil in the fourth quarter as well. This means that there will be more possibilities that will be looked into for growth stabilization. The stocks in Asia and Europe have fallen down at the beginning of this month and this indicates that there is an economic meltdown in China.


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