Fears of a 'double-dip' downturn gain ground

Fears of a "double-dip" global recession are gaining ground, as Chinese manufacturing growth cools and British industry's recent gains look set to slow.

Hot on the heels of last week's disappointing US GDP figures – showing that in the second quarter growth dipped to 2.4 per cent from the 3.7 per cent spurt earlier in the year – China's Federation of Logistics and Purchasing yesterday published data indicating that manufacturing growth slowed to a 17-month low in the aftermath of a government clampdown on property speculation and polluting factories.

The Chinese index fell from 52.1 to 51.2 in June, its lowest level since the manufacturing sector stopped contracting in March 2009.

And although China is still set for a whopping 9.5 per cent expansion this year, up from 9.1 per cent in 2009, the dip in the crucial manufacturing sector raises concerns that slower growth in the world's fastest expanding economy could put the brakes on a global recovery already faltering in the face of debt-busting efforts in developed economies.

Ostensibly positive figures from Britain's manufacturing industries paint a similar picture of tricky times ahead.

Thanks to an unexpectedly strong start to the year, the EEF manufact-urers' organisation has trebled its industrial growth forecasts for 2010. In a report published today with accountants BDO Stoy Hayward, the EEF revises its growth estimates up to 3.8 per cent this year, from earlier predictions of 1.2 per cent.

But with output down by 15 per cent over the recession, the sector clearly has some way to go to make up lost ground. And the EEF has revised its 2011 growth forecast downwards, from 3.8 per cent to 3.4 per cent.

Key factors in the strong performance so far include: the weak pound; re-stocking after last year's savage rundown of inventories; and swift global recovery. But the outlook for the coming year is less certain, as global growth stumbles and the Chancellor's public-spending axe looms, says the EEF. "After the recession, manufacturing got out of the starting blocks faster than expected," Lee Hopley, the EEF chief economist said. "But we expect the future to be rather bumpier."

The EEF analysis is echoed by a CBI survey of 403 small and medium-sized manufacturers, also published today.

Some 41 per cent of respondents reported increased output over the past three months, against 20 per cent who reported a fall – producing a positive balance of 21 per cent, the highest figure since April 1995. But again, the majority of companies are expecting output to slip back in coming months.

This increasingly uncertain outlook is reflected in expectations that the Bank of England's Monetary Policy Committee will this week hold interest rates at 0.5 per cent, despite the 1.1 per cent quarter-on-quarter boost to GDP.

"While most members are encouraged by the sharp improvement in GDP growth, they are treating the performance with a considerable degree of caution and continue to have serious concerns," Howard Archer, at IHS Global Insight, said. "There is clear concern over the threat from slowing global growth and tight credit, as well as from the fiscal squeeze."

Following last week's GDP data, US Labor Department jobless statistics, out this week, are expected to show further rises in unemployment, which is already running at 9.5 per cent.

The former Federal Reserve chairman, Alan Greenspan, weighed in yesterday, decrying the state of the US economy at present as a "quasi-recession", and warning that a double-dip is "possible if home prices go down".

"We're in a pause in a modest recovery, but a pause in the modest recovery feels like a quasi-recession," he told NBC.

PROMOTED VIDEO
Arts and Entertainment
From Mean Girls to Mamet: Lindsay Lohan
theatre
Sport
Nathaniel Clyne (No 2) drives home his side's second goal past Arsenal’s David Ospina at the Emirates
footballArsenal 1 Southampton 2: Arsène Wenger pays the price for picking reserve side in Capital One Cup
News
Mike Tyson has led an appalling and sad life, but are we not a country that gives second chances?
peopleFormer boxer 'watched over' crash victim until ambulance arrived
Arts and Entertainment
Geena Davis, founder and chair of the Geena Davis Institute on Gender in Media
tv
News
i100
Travel
travelGallery And yes, it is indoors
News
ebooksAn unforgettable anthology of contemporary reportage
Arts and Entertainment
The Tiger Who Came To Tea
booksJudith Kerr on what inspired her latest animal intruder - 'The Crocodile Under the Bed'
Arts and Entertainment
British actor Idris Elba is also a DJ and rapper who played Ibiza last summer
film
News
Alan Bennett criticised the lack of fairness in British society encapsulated by the private school system
peopleBut he does like Stewart Lee
Sport
John Terry, Frank Lampard
footballChelsea captain sends signed shirt to fan whose mum had died
News
people
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

IT Project manager - Web E-commerce

£65000 Per Annum Benefits + bonus: Clearwater People Solutions Ltd: If you are...

Trainee / Experienced Recruitment Consultants

£20000 - £25000 per annum + OTE £40,000: SThree: SThree are a global FTSE 250 ...

Trainee Recruitment Consultant - Soho

£20000 - £25000 per annum + OTE £40000: SThree: As a Recruitment Consultant, y...

Trainee Recruitment Consultants - Banking & Finance

£20000 - £25000 per annum + OTE £40,000: SThree: SThree Group have been well e...

Day In a Page

Syria air strikes: ‘Peace President’ Obama had to take stronger action against Isis after beheadings

Robert Fisk on Syria air strikes

‘Peace President’ Obama had to take stronger action against Isis after beheadings
Will Lindsay Lohan's West End debut be a turnaround moment for her career?

Lindsay Lohan's West End debut

Will this be a turnaround moment for her career?
'The Crocodile Under the Bed': Judith Kerr's follow-up to 'The Tiger Who Came to Tea'

The follow-up to 'The Tiger Who Came to Tea'

Judith Kerr on what inspired her latest animal intruder - 'The Crocodile Under the Bed' - which has taken 46 years to get into print
BBC Television Centre: A nostalgic wander through the sets, studios and ghosts of programmes past

BBC Television Centre

A nostalgic wander through the sets, studios and ghosts of programmes past
Lonesome George: Custody battle in Galapagos over tortoise remains

My George!

Custody battle in Galapagos over tortoise remains
10 best rucksacks for backpackers

Pack up your troubles: 10 best rucksacks for backpackers

Off on an intrepid trip? Experts from student trip specialists Real Gap and Quest Overseas recommend luggage for travellers on the move
Secret politics of the weekly shop

The politics of the weekly shop

New app reveals political leanings of food companies
Beam me up, Scottie!

Beam me up, Scottie!

Celebrity Trekkies from Alex Salmond to Barack Obama
Beware Wet Paint: The ICA's latest ambitious exhibition

Beware Wet Paint

The ICA's latest ambitious exhibition
Pink Floyd have produced some of rock's greatest ever album covers

Pink Floyd have produced some of rock's greatest ever album covers

Can 'The Endless River' carry on the tradition?
Sanctuary for the suicidal

Sanctuary for the suicidal

One mother's story of how London charity Maytree helped her son with his depression
A roller-coaster tale from the 'voice of a generation'

Not That Kind of Girl:

A roller-coaster tale from 'voice of a generation' Lena Dunham
London is not bedlam or a cradle of vice. In fact it, as much as anywhere, deserves independence

London is not bedlam or a cradle of vice

In fact it, as much as anywhere, deserves independence
Vivienne Westwood 'didn’t want' relationship with Malcolm McLaren

Vivienne Westwood 'didn’t want' relationship with McLaren

Designer 'felt pressured' into going out with Sex Pistols manager
Jourdan Dunn: Model mother

Model mother

Jordan Dunn became one of the best-paid models in the world