Manufacturing output declines in China, India and US, leading investors to turn to gold investments

This article is more than 4 years old

This article is more than 4 years old

Figures from China showing that factory output contracted for a 10th straight month in December pointed to a continuation of 2015’s global economic slowdown and the likelihood of worse to come.

Jitters over China manufacturing slowdown wipe £38bn off FTSE 100 Read more

Separate figures revealed India suffered a shock fall in manufacturing output in the month before Christmas.

To cap it all, factory figures from the US showed that the world’s largest economy can catch a cold when China sneezes. Far from being immune, US factories reported declines in new orders and, without an upturn in sight, large scale layoffs.

Investors, spooked by the rash of bad news, raced towards safe havens to stash their money. Gold prices jumped and the Swedish krona, long considered a safe currency, soared to new highs before the country’s central bank threatened to intervene to prevent a further appreciation.

Stock markets, including Tokyo, New York and London, tumbled. Oil prices, which have slumped in recent months to an 11-year low, were caught in the Saudi Arabia-Iran row, with buyers first sniffing a war that would limit supplies, sending prices higher, before deciding that Saudi Arabia, the world’s largest producer, would want to keep pumping the black stuff to maintain low prices to hurt Iran’s oil revenues.

Some analysts have likened the current turmoil to the third and final act of the 2008 banking crisis. After the bank bailouts that crippled the west and the subsequent austerity, which delayed the recovery, the colossal borrowing by developing world nations must be reined in.

Beijing borrowed heavily to maintain production in the wake of the crash and has attempted to limit lending since 2014, especially to state enterprises, many of them large-scale manufacturers, and local authorities that fund construction.

Investors nervous as China looks set to repeat mistakes of last summer Read more

Re-shaping of the economy away from steel and copper smelting to a more westernised service economy was always going to cause jitters in world markets that have become dependent on cheap Chinese goods.

Yet that is little comfort to manufacturing businesses in all corners of the globe attempting to plan for the future. What level of investment should they adopt and how many workers will they need?

Low oil prices are a huge boon, making everything from energy to transport costs cheaper. But dwindling demand for goods worldwide is a bigger factor in the investment equation than cheaper supplies, which is why the UK steel industry has already shed 5,000 workers and many more are at risk outside Britain’s golden circle of aerospace builders, car makers and pharmaceutical firms.