China’s manufacturing indicator has fallen bigger than expected.
From the Wall Street Journal
China's official Purchasing Managers Index fell significantly to 50.4 in May compared with 53.3 in April, the China Federation of Logistics and Purchasing, which issues the data with the National Bureau of Statistics, said in a statement Friday.
The May PMI was also lower than the median forecast of 51.5 from 10 economists polled by Dow Jones Newswires.
The decline is likely to add to market concern about a sharp slowdown in the world's second-largest economy. Some economists say China's economy won't be able to rebound from its recent weakness until the second half of the year when stimulus measures start to show an effect.
A PMI reading above 50 indicates an expansion in manufacturing activity, while a reading below 50 indicates contraction
If China’s PMI falls below 50, then the risks of a full blown recession or financial crisis (bubble bust) gets amplified.
The recent decline of commodity prices appears to be a harbinger for this.
Add to the current market fragility and burgeoning uncertainty is China government’s articulated position of withholding intervention for the moment.
A former Chinese official—Xia Bin, head of the financial research institute at the cabinet's think-tank, the Development Research Centre and a former member of the central bank's monetary policy committee until March recently—even chaffed at West for the clangorous demand for more easing policies and stimulus.
From an earlier Reuters article,
"Americans and Europeans like it. Investors like it because they want to speculate on stocks. The whole world is hoping China will relax policy," Xia told Reuters.
"We will fall into a trap if we do. We will not be that stupid," Xia said, adding that the government should only stimulate economic growth in a "balanced and modest" way, while forging ahead with structural reforms to sustain growth over the longer term.
Be very careful out there.
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