The World Is Standing By For Bad News Out Of China

At  9:00 p.m. ET, China’s National Bureau of Statistics will release its June manufacturing PMI report.

Economists are expecting a reading of 50.1, down from 50.8 in May.

Any reading below 50 signals contraction, so this deteriorating number reflects just marginal expansion.

China is the world’s second largest economy and one of the remaining engines of global growth.

“The flash HSBC manufacturing PMI for China fell substantially again from 49.2 in May to 48.3 in June,” notes Societe Generale’s Wei Yao, pointing to a preliminary PMI report.

“In May, the official manufacturing PMI advanced unexpectedly, moving in the opposite direction to the HSBC index,” added Yao.  We think this might have been due to a change in the seasonal adjustment method. However, the official series is unlikely to defy the gravity of growth deceleration in June and should follow suit. We expect a decline of nearly 1 point to 49.9.”

Earlier today, we learned that South Korean exports unexpectedly contracted in June. Korea is facing its own challenges, especially as its currency strengthens substantially against the Japanese yen. Still, its exports are hugely exposed to mainland Asia, and is therefore sensitive to demand out of China.

All of this comes as interest rates rise in China, signaling financial stress.  For the most part, China and its central bank has been standing by quietly.

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