Following yesterday's 7% drop in China's Shanghai Composite Index, the Purchasing Managers' Index in China rose from 53.3 in July to 54.0 in August, signaling that the expansion in the manufacturing sector accelerated modestly in the latest month. A reading above 50 is expansionary.
China's economy has grown dramatically in recent months as well-directed stimulus money has bolstered growth and offset weak exports. Strong lending growth from the banks has also buttressed the expansion, but concerns that the government may restrict lending to prevent new bubbles from developing spooked the market yesterday and sent commodity prices spiraling lower today.
Although the world economy does appear to be poised for a rebound, and copper prices, which have historically been a precursor to economic activity, are well off the lows, a key measure of world activity, the Baltic Dry Index, has shown signs of weakness lately. And I will take a look at the pricing measure shortly.
Monday, August 31, 2009
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