China reported that the country’s Purchasing Managers’ Index (P.M.I.) came in at 50.5 for January which was higher than analysts’ projections of 49.5 and greater than the previous December’s Index of 50.3...
China reported that the country’s Purchasing Managers’ Index (P.M.I.) came in at 50.5 for January which was higher than analysts’ projections of 49.5 and greater than the previous December’s Index of 50.3. Due to the fact that the figure is close to 50 reduces the likelihood the government will change monetary policies. Yet, in a different survey provided by HSBC, the China Manufacturing P.M.I. came in at 48.8 greater only 0.1 points from their measured December’s figure of 48.7. Numbers above the 50 point mark indicate growth for the sector. The country saw a contraction from October to November which was the first seen since 2009. Slowed growth in the global economy as well as in the country’s government ruled, property sector have been lowering growth for the country. Additionally, analysts report factories are still reducing employee payrolls as well as decreasing production based on curbed demand.
Analysts predict the first quarter will be difficult in 2012 with growth reducing to approximately 8.0%. The fourth quarter last year (2011) that ended December came in at 8.9%. The most productive industries for the manufacturing sector were tied to the increasing demand during the holiday season which included beverages, food processing, and tobacco. Those industries that experienced production contraction included manufacturing of products related to construction and industrial production as well as furniture and more. Great concern lies in depreciating external demand, a sign of global economic slowdown due mainly to decreases in purchasing by European countries. Thousands of the country’s businesses along the coastal region have gone out of business due to the decreases in exports.
A slowdown in China will affect commodity driven economies such as Australia and New Zealand. Australia has already lowered interest rates in the past two policy meetings and New Zealand is keeping rates on hold until the European crisis is resolved. The Reserve Bank of Australia is expected to announce another 25 basis point rate cut at its policy meeting next week.
Eugene Ross, Analyst
Admiral Markets
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