New China PMI data from HSBC show that manufacturing in the People’s Republic has dropped back to levels last measured during the global recession. The numbers are an indication that China’s GDP estimates of 8% for this year could be greatly exaggerated.

The HSBC China manufacturing Purchasing Mangers’ Index (PMI) fell to fell to 47.6 in August from  July’s 49.3. A figure below 50 signal contraction. The drop was the 10th month in a row.

According to MarketWatch

Details of the HSBC survey signalled a renewed decline in factory output, with new export orders and input costs subindexes also at their weakest readings since March 2009.

China has not started an official stimulus like the one it did in 2009. It has eased monetary policy, which clearly has not been enough to reverse what is an unexpectly sharp slid.

Since China’s export partners in the EU are mostly in recession, and the economies of the U.S. the U.K, and Japan have slowed, the numbers might be expected. And, China’s own middle class, numbered as many as 250 million, may have cut consumer spending because of their own fears about jobs and wages.

Many experts believe that the Chinese government and provinces release data that it overly optimistic to mask a slowing economy. If so, China’s 8% GDP growth could be much lower.

Douglas A. McIntyre

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