Econintersect: The official PMI (Purchasing Managers Index) slumped below the 50 level that marks contraction for the first time in 11 months. It joins the “other” PMI Index from the Hong Kong Shanghai Bank (the HSBC PMI) that has just come in with a final reading of 47.6 for August. This index had a preliminary reading (GEI News) of 47.8 last week. The official PMI, which covers surveys of large companies, including SOEs (state owned enterprises) has been above the contraction line for almost a year, while the HSBC survey, covering mid-sized and small companies, has been indicating a contraction for the past ten months.
The reading from the HSBC PMI is at the lowest level since March 2009, at the depth of the Great Recession.
China has been experiencing a collapse of inflation, with CPI (consumer price index) reported at 1.8% growth year-over-year in July, while PPI (producer price index) experienced its fifth month of deflation with a reading of -2.9% year-over-year.
Many are saying that the collapsing inflation numbers give the government lots of monetary options to stimulate the economy.
Asia/Pacific stocks were generally lower Monday morning after the lower PMI numbers were announced. Oil prices declined as well, but golf continued its recent rally in early trading.
- China HSBC PMI Drops to 47.6, worst since March 2009 (Lucy Hirnby, Reuters, 02 September 2012)
- UPDATE: Asian Shares Mostly Lower; Weak China PMI Weighs Sentiment (Daniel Inman, The Wall Street Journal (02 September 2012)
- China: Flash PMI Down Sharply (GEI News, 24 August 2012)
- China Approaches Deflation (GEI News, 09 August 2012)