More Economic News —- None Of It Good, Again


Well, China’s manufacturing PMI is in. 

HSBC Corp.’s purchasing managers index fell to 50.4 from March’s 51.6 on a 100-point scale on which numbers above 50 show an expansion in activity.

“The slower growth of manufacturing activities in April confirmed a fragile growth recovery of the Chinese economy as external demand deteriorated,” said HSBC economist Hongbin Qu in a statement.

China’s economic growth suffered an unexpected slowdown in the first three months of the year, declining to7.7 percent from the previous quarter’s 7.9 percent. The World Bank and private sector analysts have trimmed their forecasts for full-year growth, though to still robust levels of about 8 percent. ….

Analysts say the shaky recovery is being supported by state-driven investment and could be vulnerable if trade or investment weakens.

There’s no reason to believe China will hit 8% growth this year.  They hit 7.7% in the first quarter, down from the last quarter last year.  The next quarter will be lower than the 7.7% of the first quarter.  A 50.4 PMI is barely growth and certainly not something that would achieve anywhere near 8% growth.  I think hoping for 7.5% is optimistic.  In spite of China’s efforts, they’re still dependent upon exports.  Who’s going to buy their stuff?  Yesterday, I showed the horrible US economic news.  Today we see our trade deficit take it’s biggest drop since 2009.  But, it isn’t because we’re exporting more, it’s because we’re importing less.  The Fed is now, apparently, thinking about increasing their QE efforts. (see the bottom link.)

The EU, of course, is still crashing.  Which prompted the ECB to further cut interest rates.  They’re now down to a near free rate of 0.5%.  The rationale was bizarre.  And there’s now a rumor that they’ll just start buying private sector assets, perhaps, just like the US.

The sharp drop in inflation, from 1.7 percent in March, pressured the ECB to cut rates to honor its mandate to deliver price stability, which it defines as inflation close to but below 2 percent.

I would have always thought price stability would be defined as 0% inflation, but, I’m not familiar with new math. 

The sudden slump in price pressures has also raised the possibility of the ECB having to look at policy tools beyond interest rates to counter any further slide in inflation.

Because people don’t suffer enough through just a regular recession, they need to have inflation to increase more pain, or something. 

“Ultimately, we think the ECB will have to purchase private-sector assets in order to fix the transmission mechanism,” said Andrew Bosomworth at PIMCO, the world’s largest bond fund.

I wonder where that money will come from and what nations’ private sector assets would be purchased?

So, there you have it.  The world’s 3 largest economies.  Each in different stages of decline.  The manufacturing decline is so significant that it’s effected a global decline in manufacturing

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10 Responses to More Economic News —- None Of It Good, Again

  1. grumpydenier says:

    Sorry James, this is o/t but I guess you’ll see this later. Move it to another thread if you wish

  2. DirkH says:

    They fear nothing more than deflation; because if there’s 0.5 percent deflation, I might actually save 3 Euros by postponing buying that smartphone for a year, so I would do that, right?

    Now of course that’s ludicrous. They fear deflation because it increases their debt in terms of percent of GDP. Or so they think.

    What WOULD happen is that the purchasing power of the population would RISE, and people would actually purchase more stuff. This has been happening with computers all my life. Did I stop buying computers because they became cheaper? No, I bought more of them.

    • suyts says:

      Exactly. Instead they seem to prefer devaluation while the economy is contracting. Those are some hateful people!!!

      • Jason Calley says:

        Once you accept that the people who are running our fiscal and governmental institutions are sociopathic power addicts, it all makes perfect sense. They borrow, spend, and inflate the money supply because they can. They have written laws giving themselves that power and they have the guns to back it up. They do what they do because it makes them feel happy.

        If you were a fly they would pluck off your wings. Why? Because they can.

    • tckev says:

      My feelings exactly when they announce a 0.5% rate in the EU. The laws of diminishing returns of this reduction will require more to be done, or should that be something to be done.

  3. philjourdan says:

    China is dependent upon Capitalistic economies in order to grow. So, as goes he west, so goes China.

  4. tckev says:

    Every time you post on the economic woes I put this on to read your latest wisdom –

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