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China’s Manufacturing Accelerates to the Downside Threatening European Recovery

“China’s manufacturing is shrinking at a faster pace this month, a trend that threatens to stem an economic recovery in the euro area from the currency bloc’s longest-ever recession.

A preliminary reading of 48.3 for the Chinese Purchasing Managers’ Index (EC11FLAS)released today by HSBC Holdings Plc and Markit Economics compares with the 49.1 median estimate in a Bloomberg News survey of 15 economists. In Europe, a composite index based on a survey of purchasing managers in the services and manufacturing industries rose to 48.9 from 47.7 in May, Markit Economics said. While that’s the highest in 15 months, a measure below 50 still indicates contraction.

China’s manufacturing weakness, along with a cash crunch in the nation’s money market, will test how far Premier Li Keqiang is willing to go in sacrificing short-term expansion for more-sustainable long-term growth. After record credit in the first four months of the year failed to stoke growth, China’s State Council, led by Li, said yesterday that the financial system needs to do a better job of supporting the economy.

The China PMI Index “is a reminder that a strong euro-zone export recovery is unlikely” to materialize soon, said Martin Van Vliet, senior euro-area economist at ING Bank NV in Amsterdam. “Any further recovery later in the year is likely to be very slow and bumpy.”

Euro Stagnation…”

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