Thursday, August 20, 2015

Is China's economy teetering on the brink??? Will they infect other economies?

Thanks to William for the link...

via Bloomberg.
A Chinese manufacturing gauge fell to the lowest in more than six years, suggesting the economy will need further policy support to stem a deepening slowdown.
The preliminary Purchasing Managers’ Index from Caixin Media and Markit Economics was at 47.1 for August. That compared with a median estimate of 48.2 and the final reading of 47.8 the previous month. Numbers below 50 indicate contraction.
The release is the first major indicator for August and follows weaker-than-expected data on investment, industrial output, retail sales and exports in July. Policy makers have stepped up efforts to underpin growth, channeling funds to policy banks, in an effort to keep Premier Li Keqiang’s expansion target of about 7 percent this year within reach.

“Stimulus measures haven’t boosted manufacturing yet,” said Shen Jianguang, chief Asia economist at Mizuho Securities Asia Ltd. in Hong Kong. “August and September may be the darkest moments for the economy; a rebound is expected for the fourth quarter when funds channeled to local governments are actually spent.”
That sounds like a classic "command" economy...but Bloomberg buried the lead...check this part out...
China’s economy is grappling with industrial overcapacity, the fallout from a downturn in property investment and a volatile stock market. Producer price deflation deepened last month, while consumer inflation remained at about half the government’s target. Bloomberg’s monthly GDP tracker shows 6.6 percent growth in July, down from 6.9 percent in June.

What does this mean for the rest of the world?  At this point I have no idea.  It seems that for at least the next 6 months commodity prices will remain low, but the real worry is deflation.

They cut the value of their dollar and you can bet that you're gonna see additional price cutting from manufacturers in order to export their products all on the Chinese govt's tab.

That will have a ripple effect across the world.

In order to re-inflate their economy they're about to tank the rest of the world.  We don't manufacture much of anything because of the games by the investment class so we won't get hit too hard.  But Germany is about to get body slammed.  So will the rest of Asia.

I guess what I'm saying is that the phony recovery will continue, the Fed won't raise interest rates and the economy will become a major issue in the Presidential campaign and neither party has a REAL answer.

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