Futures thus far Sunday evening are ignoring the continued slowdown in Chinese economic figures.  I'm a bit surprised by that since the driver of almost all global growth the past 18 months has been centered in China.  There are actually 2 reports from China each month; one from government and one from the private sector but they have directionally been relatively close to each other, each month.  At this point, the data point to near break even in expansion v contraction in China so it will be interesting if the magicians who run the economy can turn at a 180 degree angle.

Via Bloomberg:

  • China’s manufacturing grew at the slowest pace in 17 months in July as the government clamped down on property speculation and investment in energy-intensive and polluting factories.  The Purchasing Managers' Index fell to 51.2 from 52.1 in June, the Federation of Logistics and Purchasing said on its website. A reading above 50 shows an expansion. 
  • A separate China PMI is due to be released by HSBC Holdings Plc and Markit Economics.  A deeper Chinese slowdown could weaken a global recovery already constrained by the debt burdens and unemployment of advanced economies.
  • July's PMI was the lowest since China’s manufacturing stopped contracting in March 2009 and was less than the median forecast of 51.
  • At Morgan Stanley, economist Wang Qing said the slowdown seemed concentrated in heavy industry, partly reflecting a government campaign to close inefficient businesses to meet energy-saving goals. This “does not necessarily reflect weakening in the underlying economic fundamentals,” he said.  
  • The data showed contractions in indexes of stocks of raw materials and finished goods, suggesting “a quite aggressive inventory correction” as business confidence weakens, said Tao Dong, a Hong Kong-based economist at Credit Suisse AG.
  • The PMI, released by the logistics federation and the Beijing-based National Bureau of Statistics, covers more than 730 companies in 20 industries, including energy, metallurgy, textiles, automobiles and electronics.

Another thesis could be that China properly tried to prick a growing bubble in real estate  due to their easy money policies the past quarter, but have in the past 3-4 weeks changed course again, as shown by the uptick in many commodity prices.  (and their market)  If Chinese PMI spikes next month it would appear the spigots of money from the central overlord have been turned back on.

  • Investors may be betting that the government will alter policies if necessary to sustain the pace of growth. 
  • The Chinese economy is slowing down mainly due to the ongoing property tightening measures,” said Lu Ting, a Hong Kong-based economist at Bank of America-Merrill Lynch. “Beijing will surely ramp up spending on public housing and other public works to stabilize growth.”