More Signs Of Slowdown In China’s Economy: Factory Activity Hits 3 Year Low

agxAsian and European stock indexes are both deeply red, crude oil is retreating, and U.S. stock futures are heading south following the release of China’s factory activity data for August that contracted at its fastest pace in three years, confirming that the world’s second largest economy is cooling despite renewed efforts in 2015 by China’s central bank to stimulate their economy.

The official manufacturing purchasing manager’s index (PMI) slipped to 49.7 from 50 in July, China’s National Bureau of Statistics reported on Tuesday.

A reading below 50 indicates contraction.

Meanwhile, Chinese manufacturers saw the quickest deterioration in operating conditions for over six years in August, according to the latest business data released on Tuesday from Caixin/Markit, another economic survey group.

Caixin/Markit reported that total new orders and new export business both declined at steeper rates than in July, contributing to the most marked contraction of output since November 2011.

The purchasing manager’s index (PMI), intended to provide a snapshot of operating conditions in the manufacturing economy, registered at 47. 3 in August, lower than 47.8 in July.

For six consecutive month, the PMI has contracted below the neutral reading of 50, with the latest deterioration in operating conditions the sharpest since March 2009 when the global recession was underway.

“The final Caixin China Manufacturing PMI for August continued to retreat, with sub indices signaling continued weak demand in the markets for goods and factors of production” said Dr. He Fan, Chief Economist at Caixin Insight Group in a released statement.

“Recent volatilities in global financial markets could weigh down on the real economy, and a pessimistic outlook may become self-fulfilling” Dr. He Fan added.

According to Dr. He Fan, the way to lead the market to confidence is through faster implementation of structural reform.

“Macroeconomic regulations and controls must continue and fresh reform measures must be introduced” Dr. He Fan noted.

Caixin China Composite PMI data which covers both manufacturing and services, showed a continued decline in overall Chinese business activity in August with a posting of 48.8, down from 50.2 in July, marking the fastest contraction of output since February 2009.

“The China Caixin Composite PMI fell below 50 for the first time since April 2014, indicating that the expansion of services activities was not strong enough to offset the contraction in manufacturing” Dr. He Fan said in a released statement.

-Johnathan Schweitzer

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