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CHINESE PMI HITS 7 MONTH LOW

Two of my five big concerns for 2011 (oil prices and now China) are now starting to flash some warning signs.   The latest China PMI numbers showed a sharp decline in the rate of Chinese economic expansion.  The headline figure came in at 51.7, down from 54.5 last month.  According to HSBC this is the largest month on month decline since 2004.  Output was up just slightly, business growth slowed “markedly” and inflation continued to exert pressures on the economy.  HSBC summarized the report:

Key points
• PMI falls to seven-month low of 51.7, up slightly from the earlier flash estimate of 51.5.
• New order growth eases to slowest since last August.
• Purchase price inflation hits three-month high.

Commenting on the China Manufacturing PMI survey, Hongbin Qu, Chief Economist, China & Co-Head of Asian Economic Research at HSBC said:

“The Final PMI reading confirms that the growth of China’s manufacturing sector is cooling a little, despite the small upward revision from the flash reading attributed to slightly better new orders. This is a positive development as slower growth is helpful to check inflation, while concerns about a slump in growth are unwarranted.”

Source: HSBC

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