China’s manufacturers feel the pain

The economic slowdown afflicting the China dragon appears to be worsening, as confirmed by the release of the manufacturing PMI (Purchasing Managers Index) for August which saw an unexpected fall below the all important 50 level, to 49.2 signalling contraction from this all important sector. 

New orders slumped whilst output managed a feeble rise. This added to increasing concerns of how the world’s second largest economy can manoeuvre some semblance of a soft landing during a period where the transfer of power to a new Communist party leadership falls later this year, although the exact date remains yet to be confirmed. 

Having seen the People’s Bank of China cut interest rates in both June and July and carry out numerous tweaks to the Reserve Requirement Ratio, the pressure to deliver more stimulus will mount. 

The effectiveness of stimulus measures was one of the many questions raised at the Central Bankers shindig at Jackson Hole, in the wilds of Wyoming, USA, over the weekend. 

European Central Bank (ECB) President Draghi excused himself from attending, as he was too busy preparing for this week’s European rate setting meeting and possible attack on peripheral nations’ high borrowing costs.

Federal Reserve Chairman, Ben Bernanke used the gathering to reaffirm his view that bond purchases under quantitative easing does serve a purpose, in the drive to fight down the grave US unemployment situation. 

The Federal Open Market Committee meet (FOMC) in the second week of September with QE3 firmly on the USA’s central bankers minds, but still no clear signal of if or when the ‘go go go’ signal will be given. 

We start the week with a relatively light load on the data front. 

George Osborne will be praying for an improvement from UK’s manufacturers as the Purchasing Managers reveal their activity levels, with a hope that some progress has been made from last month’s dismal release of just 45.4. 

Spain and Italy also share their own PMI this morning and will no doubt also be praying for some reprieve no matter how small, that their manufacturers have managed to halt their slide in activity.