Tags: ISM | China | US | PMI

UK Telegraph: Global Shocks from Manufacturing Drop in US, China

By    |   Wednesday, 05 June 2013 12:59 PM

A simultaneous drop in both U.S. and Chinese manufacturing threatens to give the global economy a double whammy.

American manufacturing companies reported fewer orders in May — the largest drop in their business in almost four years. The Institute for Supply Management (ISM) index fell from 50.7 percent to 49 percent, the third straight monthly drop.

Meanwhile, the China HSBC Purchasing Managers' Index (PMI) dropped to 49.2 percent from 50.4 in April, the lowest since October 2012.

Editor's Note:
 
'It’s Curtains for the US' — Hear Unapologetic Warning from Prophetic Economist.

"This is not a good moment for the world economy," David Bloom, currency chief at HSBC, told the U.K.-based Telegraph. "The manufacturing indices came in weaker than expected in China, Korea, India and Russia, and then we got America's ISM.

“We thought we had a clear picture that the US was recovering, Japan was printing money and were we’re back to happy days, and now suddenly a huge spanner has been thrown in the works."

Business executives attributed the drop in orders to falling government spending, a slowdown in China and a downturn in Europe.

Tightening fiscal policy in the United States is squeezing consumer spending, according to The Telegraph.

"People have been living in a psychological bubble,” Charles Dumas of Lombard Street Research told The Telegraph. "They ignored the cuts but now they are starting to feel it."

The ISM drop came as a surprise. Economists polled by MarketWatch had forecast the index to increase to 51 percent. The decline shows that U.S. manufacturers are feeling the pain of a global economic slowdown and foreshadows weak growth in the second quarter, according to MarketWatch.

The report showed weakness in practically every area. New orders fell from 52.3 percent to 48.8 percent, the lowest since last July, and the production index declined from 53.4 percent to 48.6 percent, the lowest since May 2009.

The drop in Chinese manufacturing activity raises concerns that the country's economy is faltering. The preliminary HSBC China PMI was 49.6.

"The downward revision of the final HSBC China Manufacturing PMI suggests a marginal weakening of manufacturing activities towards the end of May, thanks to deteriorating domestic demand conditions," said Qu Hongbin, chief China economist at HSBC, according to Reuters.

"With persisting external headwinds, Beijing needs to boost domestic demand to avoid a further deceleration of manufacturing output growth and its negative impact on the labor market."

Editor's Note: 'It’s Curtains for the US' — Hear Unapologetic Warning from Prophetic Economist.

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Economy
A simultaneous drop in both U.S. and Chinese manufacturing threatens to give the global economy a double whammy.
ISM,China,US,PMI
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2013-59-05
Wednesday, 05 June 2013 12:59 PM
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