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China's Manufacturing Data Shows Economy Slowing
CNBC ^ | 05/31/2010 | CNBC

Posted on 05/31/2010 8:12:46 PM PDT by The Magical Mischief Tour

China's factories scaled back production last month and slowed the pace of hiring in response to a drop in new orders from both home and abroad, an official survey showed on Tuesday.

Karin Slade | The Image Bank | Getty Images

The purchasing managers' index (PMI) compiled by the China Federation of Logistics and Purchasing (CFLP) fell to 53.9 in May from 55.7 in April.

The reading, which was close to the median forecast of 54.0 in a Reuters poll of 10 economists, marked the 15th straight month that the PMI has stood above the threshold of 50 that demarcates expansion from contraction.

The decline comes against a background of slowing money and credit growth, the gradual withdrawal of fiscal stimulus and measures to deter speculative buying in real estate.

However, Goldman Sachs economists Yu Song and Helen Qiao said the PMI has consistently fallen in May versus April since it was launched in 2005.

"After adjusting for this seasonality, the May reading was slightly higher than its April reading. Therefore, we would not view the softening in the headline PMI as a sign of much softer industrial growth in May," they said in a note.

Zhang Liqun, a government economist, said it was difficult to judge whether the decline was due solely to these seasonal factors.

"The fall may indicate the economy is slowing from its fast pace of growth," Zhang said in a comment issued by the logistics federation.

The PMI showed a marked slowdown in input inflation, which Zhang said would reduce cost pressures on companies.

Qu Hongbin, chief China economist at HSBC, said the slowdown signalled by the PMI, plus worries about the European debt crisis, was likely to delay an increase in interest rates to next quarter.

"This lower reading should be seen as positive as it implies that policy tightening is starting to take effect. China's overheated growth is already starting to cool down," he said.

But Qu said money and credit growth was still excessive and would require further increases in required reserves and administrative lending curbs in coming months.

The People's Bank of China has raised the proportion of deposits that banks must hold in reserve, rather than lend out, three times this year.

But the central bank has kept benchmark interest rates unchanged despite an acceleration in year-on-year gross domestic product growth to 11.9 percent in the first quarter from 10.7 percent in the final three months of 2009.

"China's GDP growth should continue to cool off in the second half of 2010, which is a must to contain inflationary risk. Despite the property measures and uncertainties on exports, GDP growth is still likely to stay around 9 percent in the second half, thanks to continued investment into ongoing infrastructure projects and steady growth in wages and consumption," Qu said in a note.


TOPICS: Business/Economy; Crime/Corruption; Foreign Affairs; Government
KEYWORDS: norksgoodbud; walmartsupplier

1 posted on 05/31/2010 8:12:46 PM PDT by The Magical Mischief Tour
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To: The Magical Mischief Tour
Well, duh, thanks for all the stuff, I mean, cheese & crackers, we have everything already!

And, if there's something might need later, it's prolly in the attic, the cellar, or the storage unit we had to rent to put all the stuff.

If we can't find in there we'll just go to the Goodwill store or yard sale and get another.

2 posted on 05/31/2010 8:22:14 PM PDT by norraad ("What light!">Blues Brothers)
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To: The Magical Mischief Tour
China's factories scaled back production last month and slowed the pace of hiring in response to a drop in new orders from both home and abroad, an official survey showed on Tuesday.

This might be the best indication yet that a double dip recession is soon to be upon us.

3 posted on 05/31/2010 8:47:24 PM PDT by mlocher (USA is a sovereign nation)
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To: The Magical Mischief Tour

You pull millions of manufacturing jobs out of the US and then you’re surprised that they’re not buying as much ...who knew?


4 posted on 05/31/2010 8:50:30 PM PDT by Last Dakotan
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To: Last Dakotan

Well, it is hard for folks to buy stuff when they have no jobs, or money to buy with...


5 posted on 05/31/2010 9:21:51 PM PDT by The Magical Mischief Tour
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To: mlocher
Get yourself a daily chart of the SPY and draw the 200 moving average on it. We are below that average and, IMHO, will bounce off of it and head back south in the next few days. It may be a bad jobs report on Friday or some other calamity, but charts usually find a reason to do what they do. There is nothing good out there and it seems people are pretending that things are looking up. They ain't.
6 posted on 05/31/2010 9:53:09 PM PDT by chuckles
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