SummaryChina's Export Machine Grind to a Halt
August data signalled a renewed decline in Chinese manufacturing output, as new business decreased at the sharpest rate in nine months. Consequently, backlogs of work fell modestly, and job shedding was recorded for the sixth month in succession. On the price front, average input costs declined at the sharpest rate in 41 months, while the rate of output price discounting remained sharp.
The pace of reduction in new orders was solid, and the most marked in nine months. Meanwhile, new export orders also decreased during August, and at the sharpest rate since March 2009.
With new business decreasing further, companies depleted their volumes of work-in-hand (but not yet completed) over the month. Although only modest, the rate of decline in outstanding business was the sharpest since January 2009.
Commenting on the China Manufacturing PMI™ survey, Hongbin Qu, Chief Economist, China & Co-Head of Asian Economic Research at HSBC said:
“The final reading of the HSBC manufacturing PMI (August) confirmed that China's manufacturing sector still faces intensifying downward pressure. New export orders contracted at the fastest pace since March 2009, this, combined with a record high in stocks of finished goods sub-index, and a 41-month low employment index, suggests China's exporters are facing increasing difficulties amid stronger global headwinds. Beijing must step up policy easing to stabilize growth and foster job market conditions.”
Notice the last sentence above regarding what China allegedly "must" do. Also note the faith in "easing" to stabilize growth.
Economists seem to believe the role of central banks is to prevent every recession. That policy works for a while, then as happened in the US with the housing crash, an even bigger recession occurs that the central bank is unable to stop or even slow.
The US economy is cooling substantially and Europe is a complete basket case. Moreover, China's infrastructure is already seriously overbuilt. There are no magic solutions for China.
Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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