London/Sydney/Washington: Business activity slowed more than any forecaster expected in the Eurozone this month while manufacturing in Asia’s top two economies hit the brakes, suggesting the global recovery path is less clear than policymakers are predicting.

The Markit Economics preliminary index of US manufacturing decreased to a three-month low of 54.2 in April from 55.7, the London-based group said Thursday. A reading above 50 for the purchasing managers’ measure indicates expansion. The median forecast in a Bloomberg survey of economists was 55.7, with estimates ranging from 54.5 to 56.4.

The sudden drop in the Eurozone flash composite Markit Purchasing Managers’ Index (PMI) was driven by sharply slower growth in manufacturing orders in Germany and France, suggesting recent optimism about the Eurozone may be overdone.

This marks the first major Eurozone indicator that has disappointed all forecasts in quite some time, and comes just a month after the European Central Bank began purchasing government bonds to stimulate the economy.

The Eurozone composite PMI fell to 53.5 from 54.0, below both the 54.4 consensus and the lowest forecast in a Reuters poll. The 50-point mark separates growth and contraction.

Factory order growth slowed particularly in France, but also in major goods exporter Germany, and the Eurozone’s No. 1 economy, suggesting more subdued activity ahead.

Both the flash manufacturing and services PMIs for France and Germany fell below the lowest forecast. For the Eurozone, only the service PMI didn’t.

“There is a clear risk that the composite PMI falls further as concerns about the situation in Greece and a possible euro exit intensify, raising the threat of a renewed economic slowdown in the Eurozone,” said Jessica Hinds, European economist at Capital Economics.

Other economists said the smaller Eurozone economies that were hit so hard by crisis are still likely to report improvement in the months ahead.

“Country data so far available suggest that the periphery did comparatively well, with a good probability that the PMIs there may show resilience when they (are) published in early May,” noted Marco Valli, economist at UniCredit.

In Britain, whose economy has performed better than the Eurozone over the past several years, retail sales fell unexpectedly in March, hit by the biggest slump in fuel sales in just under three years, separate data showed on Thursday.

CHINA STIMULUS

In China, where the government has been engineering a rebalancing of its economy away from relying too much on exporting manufactured goods towards domestic spending, the flash PMI fell to a one-year low of 49.2 from 49.6.

Economists polled by Reuters had expected it to remain steady.

Nomura analysts said the data underscored their call for two more 50 basis point cuts in the reserve requirement ratio for Chinese banks as well as three more 25 basis point interest rate cuts over the remainder of the year.

The People’s Bank of China slashed its requirement for the amount of cash that banks must hold as reserves by a full percentage point on Sunday.

Hopes of yet more stimulus have helped sparked a massive rally in the local share market. The CSI300 index of the largest listed companies in Shanghai and Shenzhen has risen over 30 per cent so far this year.

Japan’s PMI also slid, to 49.7 from 50.3 in April, as new orders continued to shrink and manufacturing production fell for the first time since July 2014. The data showed an increase factory hiring, however.

At next week’s policy review, the Bank of Japan is expected to hold off on expanding its already massive monetary stimulus but may lower its inflation forecasts.