China’s Purchasing Managers’ Index (PMI), an indicator of the outlook for manufacturing, showed an uptick for September, reversing the mostly downward trend of much of the year. As ever, we caution reading too much into a single month’s figures, but the official numbers, released early after a leak of the HSBC version, stand in contrast to much of the bearish sentiment about China’s economy seen over the past week as investors have been swept up in a global glumness that the world economy is heading for a double-dip recession.
The glass half-full is that if the slowdown in China’s growth is stabilizing, even temporarily, it provides some hope that it can sustain some global growth at least for a while. And when we peer deeply into the glass, we see that HSBC’s input-price sub index showed a slight increase, to 59.5 from 55.9, suggesting a possible brake to the decline in global commodity prices seen since April as demand has weakened. The glass half-empty is that manufacturing usually increases in September in preparation for the Golden Week holiday.
September PMIs from around the world, though sending mixed signals, follow other indicators that show that, even if a double-dip recession can be avoided, the slowdown in growth worldwide is becoming entrenched. Matters haven’t slid back to the nadir of the 2008-09 slump, but they are not far off.
The danger is that protectionist pressures will force those two points closer. In the U.S. Senate, legislation is being discussed that would make it easier for punitive tariffs to be imposed on countries deemed to being manipulating their currencies, for which read China. World leaders did well to get through the 2008-09 slump by collectively agreeing not to go down that beggar-thy-neighbor road. That consensus is considerably more fragile today.