Sunday, February 28, 2010

World Economic Data Continues to Roll Over

As far as what is going on in the real world outside the stock market, the news out of China tonight ranks pretty highly in importance.

From Bloomberg:

China’s manufacturing expanded by the least in a year in February....The Purchasing Managers’ Index fell to a seasonally adjusted 52, the Federation of Logistics and Purchasing said today in an e-mailed statement in Beijing. That was less than 55.8 in January and the median 55.2 estimate in a Bloomberg survey of 15 economists.

Of course they can't but help try to explain it away. Always an excuse. This one more ridiculous than normal.

A Chinese holiday may have affected the numbers....“We were looking for a lower PMI because of the Chinese New Year, which always hits new orders, particularly exports, as well as the beginning of the effects of government policy" said Stephen Green, an economist at Standard Chartered Plc in Shanghai.

Two things. One - the Chinese New Year is an every year event. It isn't like this was a surprise. I mean you can mark your calendar. You know when it is coming. Two this economist basically said as such. So they already brought down there estimates adjusting for this seasonality but are quick to try to explain the bad a number away using that as an excuse.

You get into the details and the number starts looking uglier.

Today’s reading was the weakest since manufacturing stopped contracting in March last year. Ten industries, including clothing and footwear, reported contractions in export orders versus 10 posting expansions, highlighting the risk that global demand may be weak this year.


The output index slid to 54.3 from 60.5. A measure of orders tumbled to 53.7 from 59.9. An index of export orders fell to 50.3 from 53.2 in January.

To Bloombergs credit (unlike say CNBC) they make an attempt to get the other side.

The number is “really ugly,” said Dariusz Kowalczyk, chief investment strategist at SJS Markets Ltd. in Hong Kong. “The weakness cannot be explained with the Lunar New Year holiday effect and indicates a slowdown in growth momentum as well as easing price pressures, which is likely to limit monetary tightening.”

This is a fairly important number followed very closely every month because China in a way is the worlds hope (which i believe is ridiculous). Can China grow enough to bail out the world?

This makes the U.S. ISM number coming out tomorrow morning at 9:00 central 10:00 eastern very interesting.

Right now there is a pretty big battle going on between this latest China data and the supposed bailout for Greece. Interesting the Euro is actually down even though Asia and U.S. futures rallied early on the Greece news and after moving down a little stabilized after this China news.

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