China PMI barely Above Contraction; Chinese Stocks Slump as Manufacturing Slows

Bloomberg reports Chinese Stocks Slump Most in Three Weeks as Manufacturing Slows

China’s stocks fell, dragging the benchmark index down the most in three weeks, as data showed the country’s manufacturing growing at a slower pace.

The Shanghai Composite has slumped 9.7 percent from a Feb. 6 high, on concern slowing growth will hurt earnings. China’s economy expanded 7.7 percent in the first quarter, missing estimates, as industrial production and fixed-asset investments in March fell short of forecasts. Rising Chinese home prices may limit scope for stimulus as President Xi Jinping seeks to prevent a real-estate bubble.

“This has been a very narrowly based recovery, predominantly driven by infrastructure investment, but now even infrastructure investment is also apparently slowing down,” said Tao Dong, head of Asia economics excluding Japan at Credit Suisse Group AG in Hong Kong.

China PMI barely Above Contraction

As I have said on numerous occasions, China’s infrastructure build-out is both ridiculous and unsustainable. Yet that does not stop for one second the cheerleading.

For example please consider the Markit report headline for China Manufacturing that shows Operating conditions improve marginally in April

It is really tough to spin that stagnation, assuming you even believe it (I don’t), into something positive. Hongbin Qu, Chief Economist, China & Co-Head of Asian Economic Research at HSBC managed to do just that.

Qu stated “The HSBC Flash China Manufacturing PMI came in at a two-month low, but still managed to expand modestly in April, albeit at a much slower pace. However, new export orders contracted after a temporary rebound in March, suggesting external demand for China’s exporters remains weak. Weaker overall demand has also started to weigh on employment in the manufacturing sector. Beijing is expected to respond strongly to sustain the economic recovery by increasing efforts to boost domestic investment and consumption in the coming months.”

Really?

50.5 is “modest expansion”?! Would 49.5 have been “modest contraction?”

Let’s at least be honest about this. At best China is stagnating and this is in spite of an unwarranted and unsustainable infrastructure build-out.

Mike “Mish” Shedlock
http://globaleconomicanalysis.blogspot.com

Mike “Mish” Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Mish’s Global Economic Trend Analysis

China PMI barely Above Contraction; Chinese Stocks Slump as Manufacturing Slows

China PMI barely Above Contraction; Chinese Stocks Slump as Manufacturing Slows

Bloomberg reports Chinese Stocks Slump Most in Three Weeks as Manufacturing Slows

China’s stocks fell, dragging the benchmark index down the most in three weeks, as data showed the country’s manufacturing growing at a slower pace.

The Shanghai Composite has slumped 9.7 percent from a Feb. 6 high, on concern slowing growth will hurt earnings. China’s economy expanded 7.7 percent in the first quarter, missing estimates, as industrial production and fixed-asset investments in March fell short of forecasts. Rising Chinese home prices may limit scope for stimulus as President Xi Jinping seeks to prevent a real-estate bubble.

“This has been a very narrowly based recovery, predominantly driven by infrastructure investment, but now even infrastructure investment is also apparently slowing down,” said Tao Dong, head of Asia economics excluding Japan at Credit Suisse Group AG in Hong Kong.

China PMI barely Above Contraction

As I have said on numerous occasions, China’s infrastructure build-out is both ridiculous and unsustainable. Yet that does not stop for one second the cheerleading.

For example please consider the Markit report headline for China Manufacturing that shows Operating conditions improve marginally in April

It is really tough to spin that stagnation, assuming you even believe it (I don’t), into something positive. Hongbin Qu, Chief Economist, China & Co-Head of Asian Economic Research at HSBC managed to do just that.

Qu stated “The HSBC Flash China Manufacturing PMI came in at a two-month low, but still managed to expand modestly in April, albeit at a much slower pace. However, new export orders contracted after a temporary rebound in March, suggesting external demand for China’s exporters remains weak. Weaker overall demand has also started to weigh on employment in the manufacturing sector. Beijing is expected to respond strongly to sustain the economic recovery by increasing efforts to boost domestic investment and consumption in the coming months.”

Really?

50.5 is “modest expansion”?! Would 49.5 have been “modest contraction?”

Let’s at least be honest about this. At best China is stagnating and this is in spite of an unwarranted and unsustainable infrastructure build-out.

Mike “Mish” Shedlock
http://globaleconomicanalysis.blogspot.com

Mike “Mish” Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Mish’s Global Economic Trend Analysis

China PMI barely Above Contraction; Chinese Stocks Slump as Manufacturing Slows

Why There"s a Bull Market for Stocks and a Bear Market for Workers

Tweet

Today the Dow Jones Industrial Average rose above 14,270 — completely erasing its 54 percent loss between 2007 and 2009.

The stock market is basically back to where it was in 2000, while corporate earnings have doubled since then.

Yet the real median wage is now 8 percent below what it was in 2000, and unemployment remains sky-high.

Why is the stock market doing so well, while most Americans are doing so poorly? Four reasons:

First, productivity gains. Corporations have been investing in technology rather than their workers. They get tax credits and deductions for such investments; they get no such tax benefits for improving the skills of their employees. As a result, corporations can now do more with fewer people on their payrolls. That means higher profits.

Second, high unemployment itself. Joblessness all but eliminates the bargaining power of most workers — allowing corporations to keep wages low. Public policies that might otherwise reduce unemployment — a new WPA or CCC to hire the long-term unemployed, major investments in the nation’s crumbling infrastructure — have been rejected in favor of austerity economics. This also means higher profits, at least in the short run.

Third, globalization. Big American-based corporations have been expanding and hiring around the globe where markets are growing fastest — even while the U.S. market is lackluster. Tax policies and trade policies have encouraged them.

Finally, the Fed’s easy-money policies. They’ve pushed investors into the stock market because bond yields are so low. On Tuesday, the yield on the 10-year U.S. Treasury note was just 1.9 percent.

All of this spells widening inequality in America, because the people who invest the most in the stock market have high incomes. Those who rely most on wages have lower incomes.

Corporate profits are claiming a larger share of national income than at any time in 60 years, while the portion of total income going to employees is near its lowest since 1966.

As my colleague Immanuel Saez recently found, all the economic gains between 2009 and 2011 (the last year for which data were available) went to the richest 1 percent of Americans. The bottom 99 percent has continued to lose ground.

The sequestration is likely to make all this worse, since it will slow the U.S. economy and keep unemployment higher than otherwise.

It will also hurt the most vulnerable. Some $ 1.9 billion in low-income rental subsidies are being eliminated, affecting 125,000 people. Cuts to the Department of Agriculture will eliminate rental assistance for another 10,000 low-income rural people. Meanwhile, 100,000 formerly homeless people are likely to be removed from their current emergency shelters.

More than 3.8 million Americans receiving long-term unemployment benefits will have their monthly payments reduced by as much as 9.4 percent, and lose an average of $ 400 in benefits over their period of joblessness.

The Department of Education’s Title I program, which helps schools serving more than a million disadvantaged students, will be cut $ 715 million, and $ 400 million will be cut from Head Start, the preschool program for poor children. And major cuts will be made in the Special Supplemental Nutrition Program for Women, Infants, and Children, which provides nutrition assistance and education.

Rarely before in American history have public policies so radically helped the most fortunate among us, so cruelly harmed the least fortunate, and exposed so many average working Americans to such widespread insecurity.

ROBERT B. REICH, Chancellor’s Professor of Public Policy at the University of California at Berkeley, was Secretary of Labor in the Clinton administration. Time Magazine named him one of the ten most effective cabinet secretaries of the last century. He has written thirteen books, including the best sellers “Aftershock” and “The Work of Nations.” His latest is an e-book, “Beyond Outrage,” now available in paperback. He is also a founding editor of the American Prospect magazine and chairman of Common Cause.

Follow Robert Reich on Twitter: www.twitter.com/RBReich

Robert Reich

Why There"s a Bull Market for Stocks and a Bear Market for Workers

Trademiner Software - For Trading Stocks Futures Forex

Tweet

Trademiner Software - For Trading Stocks Futures Forex