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China PMI data to confirm economic slowdown?
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A string of data in the coming days from China and Japan, the two-largest economies in Asia, is expected to provide more insight into the degree of economic slowdown in the region. Attracting most attention is China’s Purchasing Manager Index data, closely followed by Japan’s industrial production. Andrew Robinson, Correspondent for Saxo Capital Markets, provides some insight into the importance of the data and the actual expectations.
China’s preliminary HSBC Purchasing Managers’ Index for September, which is drawn from the initial 85 to 90 percent of responses to the survey, came in at a two-month low of 49.4, below the 50 level which indicates contraction. If it comes in below 50 in the final data it will be the third consecutive month at this level and it will be confirmation of a real slowing in China coupled with a rub-off effect due to the challenging economic situation globally.
In Japan, industrial production data for August is particularly in focus too due to the slowdown experienced in the aftermath of the tsunami earlier this year and the effect of a general economic slowdown globally. The July data showed only a 0.6 percent increase in the month which was less than expected. This time the expectation is for a 1.5 percent increase month on month and a 1.1 percent year on year increase as Japan is rebuilding.
Also on Japan there are increased expectations that with the Japanese half-year coming to an end on September 30 Japanese exporters will repatriate their overseas earnings. So far there has been some strong evidence of this. Meanwhile it is hardly likely that the Bank of Japan or Japan’s Ministry of Finance will intervene to manufacture a dollar yen rate closer to 80. The dollar yen however might edge up to the upper end of 76-78 in the coming days.
China’s preliminary HSBC Purchasing Managers’ Index for September, which is drawn from the initial 85 to 90 percent of responses to the survey, came in at a two-month low of 49.4, below the 50 level which indicates contraction. If it comes in below 50 in the final data it will be the third consecutive month at this level and it will be confirmation of a real slowing in China coupled with a rub-off effect due to the challenging economic situation globally.
In Japan, industrial production data for August is particularly in focus too due to the slowdown experienced in the aftermath of the tsunami earlier this year and the effect of a general economic slowdown globally. The July data showed only a 0.6 percent increase in the month which was less than expected. This time the expectation is for a 1.5 percent increase month on month and a 1.1 percent year on year increase as Japan is rebuilding.
Also on Japan there are increased expectations that with the Japanese half-year coming to an end on September 30 Japanese exporters will repatriate their overseas earnings. So far there has been some strong evidence of this. Meanwhile it is hardly likely that the Bank of Japan or Japan’s Ministry of Finance will intervene to manufacture a dollar yen rate closer to 80. The dollar yen however might edge up to the upper end of 76-78 in the coming days.
See more of Andrew's Asian market commentary on TradingFloor.com