The HSBC China Services Purchasing Managers’ Index dropped to a three-month low as the June figure came in at 50.6 down from 51.9 in May. A number under 50 shows contraction in the manufacturing sector.
The data gives one more proof that exports have frozen because of troubled economies, particularly in Europe. And, it appears the U.S. has entered another period of slow growth. The IMF said yesterday that without an end to political gridlock in Washington, GDP could be as low as 1% next year.
Internal consumption by China’s rising middle class may also have slowed as this portion of the Chinese population worries about job availability tied to economic expansion. The economic structure of the People’s Republic is based on a growth rate of 9% or better, and in most recent years, with the exception of the recession, the GDP improvement has been over 10% a year. Many estimates are for GDP growth in China to be 7% in the second half of 2012.
China PMI may already be below 50. The government’s data is notorious poor.
Douglas A. McIntyre