CDT Money: The Numbers Game

Last week’s key data release signaled continued weakness for China’s manufacturing sector, with HSBC’s preliminary purchasing managers index (PMI) shrinking for an eighth straight month in June. Reuters reports that the 48.1 reading – anything below 50 suggests a contraction – is the lowest in seven months and matches a similar streak during the global financial crisis of 2008 and 2009. Input and output prices plunged to their lowest level in two years, writes The New York Times. The most troubling figure, export orders, slipped to its lowest level since March 2009. Even with Beijing having already taken steps in the second quarter to offset slumping exports and boost domestic consumption, including its first interest rate cut since late 2008, The Wall Street Journal reports that analysts believe the government still has more tools left in its policy arsenal: “There should be [another] cut in interest rates and in the bank-reserve ratio in July,” said Sheng Hongqing, senior economist at China Everbright Bank. “The export situation is very difficult.” Other economists were also anticipating more monetary policy moves ahead. “The government hasn’t done enough in terms of policy easing,” said Wei Yao, China economist at Société Générale. A Reuters piece out Monday asserts that no bottom is in sight as China looks increasingly likely to miss its 2012 growth target. But as bearish as recent data appear, could the real situation on the ground actually be worse? In a New York Times piece over the weekend, Keith Bradsher points out that while doubts have persisted for years about the accuracy of Chinese economic data, this is the first time in several decades that a slowdown has coincided with a leadership change at the top of a Communist Party regime that has long-relied on economic growth for its legitimacy and social ...
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