China Falls Again
With the United States on a hopeful track for a soft landing through a diversely robust economy, the globe’s second-largest superpower is having issues in one of its largest economic sectors. On Wednesday, China’s official manufacturing purchasing managers’ index was marked at 49.7, confirming a trend that has been closely watched in China’s manufacturing sector. The purchasing managers’ index, or PMI, is a survey-based indicator that tracks sectors and changing business conditions, with readings above 50 meaning expansion and those below 50 meaning contraction. This reading for the month of August, being below 50, meant that China’s factory activity had contracted, shrinking for the fifth-consecutive month. For China, the manufacturing sector accounts for over 27% of all national gross domestic product.
In addition, China’s official non-manufacturing PMI was also reported for the month of August, with their non-manufacturing activity hitting a new low for the year. The alarming signs of China’s economic slowdown across multiple sectors entails that their economy has potentially not bottomed out. Several experts point to the bulk of the contractions being caused by the property sector, which has experienced decreased sales, poor timing, credit failures, and more. Both the manufacturing and non-manufacturing figures in August have also alluded to rebounds in inflationary pressures, however, all other data has depicted consistent disinflation. With China being the second-largest economy in the world, any hiccups in performance could spell unfavorably for several other economies across the globe.
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I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.