What a confusing day for economic news in the U.S. and globally. Unemployment and housing starts point in different directions in the U.S. Short-term indicators in China and IMF forecasts disagree
Ah, the magic number. Economic growth accelerated in China for the first time in three quarters. Gross domestic product climbed 7.5% in the second quarter of 2014 from the second quarter of 2013.
Corporate bond issuance by Chinese companies grew by 54% in the first quarter of 2014 from the fourth quarter of 2013 to 1.55 trillion yuan ($250 billion.) Because bond sales in China have to be approved by central government regulators, this record for bond issuance argues that any restrictions on bank credit the government outs as evidence of monetary tightening are being more than balanced by increases in cash flow from corporate bond issuance
Today, July 1,the official purchasing managers index from the National Bureau of Statistics, came in at 51 for June. That is above the 50.8 level of May and a six-month high. The version of the purchasing managers index produced by HSBC and Markit Economics was reported today at 50.7 for June
Could the People’s Bank actually achieve that delicate policy balance of adding more liquidity to the economy in order to rev up economic growth while bringing the country’s unregulated shadow banking sector to heel?
China’s financial markets today reacted to yesterday’s (June 9) good news while ignoring today’s threatening rumbles. The People’s Bank of China announced another 0.5 percentage point cut in reserve requirements for regional and rural banks. The cuts will take effect on June 16 and will add an estimated 70 billion yuan ($11.2 billion) in liquidity to the financial system.
Is the move up in the Purchasing Managers’ Index from the National Bureau of Statistics and the China Federal of Logistics and Purchasing to 50.8 in May from 50.4 in April good news because it shows that China’s economy will increase its demand for raw materials? Or is the move up bad news because it delays a decisive change in monetary policy from the People’s Bank?
In news from China today the HSBC/Markit Economics PMI for May climbed to 49.7. That was up from 48.1 in April and well above the 48.3 expected by economists. At 49.7 the index is just below the 50 level that separates economic contraction from expansion and suggests that growth rates are stabilizing in China
