Sharp China factory slowdown in August raises global growth fears

Fri Aug 21, 2015 2:48am EDT
 
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By Koh Gui Qing

BEIJING (Reuters) - Worries of a deepening China economic slowdown intensified on Friday after a private survey showed the factory sector shrank at its fastest rate in almost 6-1/2-years in August, hammering global stocks and commodity prices.

The gloomy figure sent investors fleeing for cover in gold and bonds, fearing China's sagging economy would translate into slower global growth and muddy the outlook for the timing of the first U.S. interest rate hike in nearly a decade.

World markets had already been on edge after China's surprise devaluation of the yuan last week and a near-collapse in its stock markets in early summer.

"Uncertainty about China growth is now the main swing factor in markets," said Tim Condon, an economist at ING Group in Singapore.

"Today's data reinforced the doubts about global growth."

The preliminary Caixin/Markit China Manufacturing Purchasing Managers' Index (PMI) stood at 47.1 in August, well below a Reuters poll median of 47.7 and down from July's final 47.8.

It was the worst reading since March 2009, in the depths of the global financial crisis, and the sixth straight one below the 50-point level, which separates growth in activity from contraction on a monthly basis.

The downdraft from China is rattling economies of its trade-reliant Asian neighbors and prompting many Western companies to reduce investments and look for ways to cut costs.   Continued...

 
Employees work along a production line of a textile factory in Suzhou, Jiangsu province, China, June 13, 2015.  REUTERS/China Daily