Welcome news for investors from an unexpected source

By |2016-05-03T04:29:21+00:00May 3rd, 2016|Uncategorized|
Investors around the globe have increasingly become conditioned to the need for monetary easing, quantitative accommodation and central bank coordination to fight off the specter of negative growth – in particular since the great recession. Different regions of economic dynamism have all needed it to one extent or another and the baselines rationales for accommodation have varied widely.

In the case of China, concern over its slowing rate of expansion has played a unique role in the worrisome global GDP narrative. China, now the world’s second largest economy and fastest growing major economy, has an enormous influence on global economic performance. So it is with a degree of enthusiasm that investors great the news out of China, released in the overnight, that its official factory gauge closed above 50.0 in April. The manufacturing purchasing managers index was 50.1 for the month – the second consecutive month above 50. Additionally, the non-manufacturing PMI registered a 53.5 for the same period.

This degree of relative stabilization has broad implications – if it is trend worthy. A stabilization in China’s economic performance as measured by manufacturing and non-manufacturing would have ramifications well beyond the Pacific economic region. It would effectively mean the there may be a less immediate need for further stimulus from PBOC and as a result that the concern over China’s slowing growth may pass in the coming months. It would also mean that there may ultimately be  support for the yuan at these levels.

Economic stabilization in China would go a long way in assuaging the fear that has gripped markets that the world is headed back into a negative growth cycle.

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