Manufacturing Sentiment in China has slumped

24 Nov 11

The media this morning is full of commentary on a drop in Chinese Manufacturing sentiment.

The preliminary HSBC PMI has dropped to 48 its lowest level since March 2009 indicating a contraction in the sentiment and therefore outlook for Chinese Manufacturing. Key points that have led to the contraction are, slowing domestic demand, whilst the Chinese Government acts to keep the economy under control and inflation in check, and weaker global demand for Chinese exports.

The Australian dollar fell below US$0.98 and share markets were weaker as a result of the news, with mining stocks being the hardest hit given the fact that China is Australia's largest trading partner for our resources boom.

This is a timely reminder to the Gillard Government that Australia's two-speed economy and reliance on the mining boom is dangerous. Our own manufacturing industry is in decline and whilst the Government has made some efforts to support local industry, the question remains are they far reaching enough to stimulate non-resource sectors, in the face of the mining boom potentially tappering off, and protection of local jobs.

Australia's AIGroup PricewaterhouseCoopers PMI is due out toward the end of next week.