China and Japan Manufacturing Slows Down

China’s manufacturing activity hit a three-month low in August, raising the case for fresh policy steps to keep growth on track, while a Reuters poll showed Japan’s economic recovery is likely to be modest despite a small acceleration in the factory sector.

Surveys conducted by HSBC/Markit and Reuters highlighted fragility in recovery of the world’s second- and third-largest economies at a time when policymakers try to walk a fine line between supporting growth and pushing structural changes.

The HSBC/Markit Flash China Manufacturing Purchasing Managers’ Index (PMI) fell to 50.3 in August from July’s 18-month high of 51.7, badly missing a Reuters forecast of 51.5 but still hovering above the 50 threshold that separates expansion from contraction.

 
“The sharp drop in the PMI is perhaps not surprising given last month’s disappointing activity and lending data. That said, we are not expecting a rapid deterioration in economic momentum,” Julian Evans-Pritchard, China economist at Capital Economics, wrote in a note.

“Meanwhile, we expect the government to continue to fine tune policy as necessary to prevent growth from slipping too much over the coming quarters.”

Most Asian stock markets, including Hong Kong and China, extended early losses after the PMI survey while the Australian dollar AUD=D4, often used as a liquid proxy for bets on China, fell.

via Reuters

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza