US cuts and manufacturing slowdown fuel growth fears

US cuts and manufacturing slowdown fuel growth fears

As traders tracked the talks in Washington, there was little encouragement to be taken from most of the manufacturing surveys.

In Britain, activity unexpectedly contracted in February, with an index from the Chartered Institute of Purchasing and Supply sinking to 47.9 from 50.5 in January.

Europe’s manufacturing sector contracted for the nineteenth month in a row as the continent’s debt crisis weighed on demand. Although still expanding in China, a separate survey showed the pace of manufacturing in Asia’s largest economy was at a five-month low.

America’s manufacturing sector offered the one bright spot, with an index from the Institute of Supply Manufacturing climbing to a better-than-expected 54.2 last month from 53.1 in January.

Despite the better performance from the US manufacturing, the International Monetary Fund warned this week that the spending cuts will knock about half a percentage point off growth in the world’s largest economy.

“The problem though is that we just don’t know how it (the US econmy) will react once the cuts really start to come through,” said James Knightley, an economist at ING.

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