China’s fresh purchasing managers index (PMI) data showed its economy has moved toward a state of stagnation, and manufacturing has moved into reverse. In the meantime, the PMI number for Germany moved sharply in the right direction.
For July, the HSBC figure for the People’s Republic was, according to Markit:
Flash China Manufacturing PMI at 47.7 (48.2 in June ). Eleven-month low.
Flash China Manufacturing Output Index at 48.2 (48.6 in June). Nine-month low.
In Germany, on the other hand according to Market:
Flash Germany Composite Output Index at 52.8 (50.4 in June),5-month high.
Flash Germany Services Activity Index at 52.5 (50.4 in June), 5-month high.
Flash Germany Manufacturing PMI at 50.3 (48.6 in June), 5-month high.
Flash Germany Manufacturing Output Index at 53.4 (50.5 in June), 17-month high.
With 50 as the line of demarcation, China essentially has reached the point of recession, while Germany has broken into unexpected expansion. Whether Germany’s place as a trading partner, primarily with the European Union, can continue to recover will depend on whether the recession in the region has begun to come to an end.
In China, on the other hand, the number is another confirmation that gross domestic product (GDP) has dropped below 7%, the level at which the central government will intervene. Ironically, Germany and China are huge trading partners, so eventually, the fate of the one will effect the other.
The net news is bad for the United States because its exports to China are much larger than those to Germany. The conclusion may be indirect, but America cannot continue expansion if China has started to take a huge dip.
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