Shocking US factory orders and Chinese bank woes trigger global flight to safety

“Absolutely awful” factory figures as new orders suffer worst slump since 1980 recession

Factory orders in the US suffered their steepest fall for 33 years in January and also slowed further in China, raising fresh concerns about the strength of the world’s two biggest economies.

The shock figures set off a renewed flight to safety in New York, where yields on US 10-year Treasuries fell to a three-month low of 2.60pc. The Dow Jones index tumbled 326 points, breaking through crucial technical support levels.

Rob Carnell from ING said the survey was “absolutely awful”, with the real worry being a slump in new orders not seen since the recession of 1980.

Analysts said it was unclear whether the collapse could be blamed on polar conditions across the US, or whether deeper forces were at work. There was a sharp slide in orders for machines and white goods in December even before the cold snap.

Mr Roach said American households had not yet finished the epic purge needed to bring borrowing levels back to historic levels. The debt-to-income ratio has dropped from 135pc to 109pc since the sub-prime bubble burst in 2007 but still has another 35 percentage points to go, implying powerful headwinds for the US economy for years to come. “American consumers’ balance-sheet repair is, at best, only about half-finished,” he wrote on the Project Syndicate blog.

The US Federal Reserve insists that America’s growth has reached “escape velocity” as the housing market recovers and the shale gas boom revives large sectors of industry. Yet the picture is murky. The labour participation rate is still at a 50-year low of 62.8pc, evidence of a jobless recovery.

All key measures of the US money supply have been slowing for months. The growth rate of broad M2 measure has halved to around 5pc from 10pc two years ago, signalling a lull ahead.

Full article: Shocking US factory orders and Chinese bank woes trigger global flight to safety (The Telegraph)

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