China’s manufacturing economy staged a moderate rebound in August after slowing for several months under the onslaught of government measures to rein in credit and deter property speculation.

Despite encouraging signs of stabilization in a pair of business surveys released on Wednesday, analysts cautioned that the robust domestic economy would have to battle the headwinds of soft external demand, especially from the United States.

“This reconfirms our long-held view that China is moderating rather than melting down,” said Qu Hongbin, chief economist for China at HSBC.

He was commenting on a rise in the bank’s purchasing managers’ index (PMI) to a three-month high of 51.9 in August from 49.4 in July. A PMI produced by the China Federation of Logistics and Purchasing (CFLP) also rose, to 51.7 from 51.2.

Investors cheered the news. MSCI’s index of Asia Pacific stocks outside Japan rose 1.9 percent .MIAPJ0000PUS, while metals prices got a lift in anticipation of stronger Chinese demand.

“After the run of weak data from the United States through August, the Chinese numbers were a breath of life for the start of the new month,” a metals dealer in Perth said. <MET/L>

The increase in the official PMI was close to the median forecast of 51.8 in a Reuters poll.

A figure above 50 denotes expansion; a reading below 50 indicates that business has contracted from the month before.

Both gauges had been trending lower — since January in the case of HSBC’s and since April for the CLFP’s. This had fanned concern that Beijing was overdoing its tightening and throttling an economy that has become a major driver of global growth.

But Zhang Liqun, a government researcher, said the official survey of 820 firms across China showed that market concerns of an abrupt slowdown were unfounded.

“The modest rise in August’s PMI shows that there will not be a deep correction in the Chinese economy,” Zhang said in a comment on behalf of the logistics federation, which compiles the index for the National Bureau of Statistics.

In a sign that Beijing may increase investment to ensure the recovery stays on track, the National Development and Reform Commission (NDRC) urged speedy implementation of the country’s 4 trillion yuan ($585 billion) stimulus package that was announced nearly two years ago.

“We must accelerate the construction of projects as long as they are of sufficient quality, and put them in use as soon as possible,” the NDRC, a powerful agency, said.

ORDERS, INVENTORIES BODE WELL

Both surveys showed a decline in the stocks of finished goods even as orders improved, an indication that manufacturers will have to ramp up production to meet demand.

“The new orders to finished goods inventory PMI has been a good indicator of turning points in the cycle over the past two years,” Ben Simpfendorfer, an economist with Royal Bank of Scotland in Hong Kong, said.

“It suggests the current correction began in the middle of the first quarter and was tentatively signaling stabilization even before today’s sharp rise in the ratio,” he said in a reaction to the official PMI.

Bank of America Merrill Lynch agreed that the inventory and orders data boded well for a recovery in output in coming months.

With the government mounting a big push to build public housing, the bank reaffirmed its full-year GDP growth forecast of 10.1 percent, up from 9.1 percent in 2009.

But it said weakening growth in the United States and Japan would act as a drag on the economy and could prompt Beijing to slow the pace of the yuan’s rise.

According to HSBC’s survey, new export orders fell outright in August for the third month in a row.

Brian Jackson with Royal Bank of Canada in Hong Kong said it was too soon to celebrate the signs of stabilization.

“We expect China will have a relatively moderate slowdown over the second half of 2010, but weaker external demand from the United States and Europe still represent a significant downside risk in coming months,” he said in a note.

Several economists also expressed concern at a sharp rise in input prices in both surveys.

But He Yifeng, an economist with Hongyuan Securities in Beijing, said it was also evidence of stronger economic activity.

“As businesses see economic growth picking up, they will want to step up investment and this will increase demand for upstream products and push up prices of inputs such as iron ore,” he said.

Source

This recession is not only not as bad as the Great Depression, it isn’t even the worst recession we’ve had since then, financial guru Dave Ramsey said during a live webcast Thursday night.

Ramsey, who mixes financial advice with Tennessee homespun humor, spoke through more than 6,000 locations Thursday night in what was called a “Town Hall for Hope. Several churches in Abilene took part in the event, including Pioneer Drive Baptist, where more than 100 people gathered in the sanctuary for the two-hour event.

Ramsey said the recessions in 1973-74 and in 1982 were worse than this recession, which he said is fueled by fear. In the 1970s, Ramsey said the market fell 50 percent and took 61 months to recover. In addition, inflation was at 11 percent and there was an energy crisis. He said none of those problems are as severe now.

He did warn that inflation could return if Congress doesn’t cut spending.

“They’re (lawmakers) starting to make drunk sailors look cautious,” he said.

Ramsey, speaking live from a church in Edmond, Okla., started the event by speaking for about 30 minutes about the economy. Describing himself as “from the old school,” he said he was against the bailout of large banks.

“I think we ought to let the chips fall where they fall,” he said.

Although he described himself as a capitalist, he took on some of the faults that he sees in modern capitalism.

“I’m a believer in capitalism that has a value system,” he said. “I believe in what Emerson said: ‘Doing well is a matter of doing good.’”

A follower of the Milton Friedman school of economics, Ramsey said businesses should be allowed to fail.

“If you open a restaurant and the food is bad and the service is bad, you’re going to fail,” he said. “And you should. You’re freakin’ lame. Failure will run you toward excellence.”

Ramsey said viewing the economy as a cake where one person’s large slice means a smaller slice for someone else was inaccurate.

“It’s like a flame,” he said. “If I light your candle with my candle, it doesn’t diminish mine or mean yours will be smaller. The economy isn’t finite.”

Ramsey, who has a radio show and is featured on Fox Business Channel, took questions on the economy from Twitter, e-mail, texts, phone calls and from the live audience.

In answer to one question, he said real estate would lead the recovery because of low interest rates.

This is an absolute fabulous time to buy a house,” he said. “Interest rates are at a 50-year low. What’s going to happen is there’s going to be pent-up demand and it’s going to whoosh and bring along the stock market and jobs with it.”

He also encouraged remaining in the stock market because “it’s artificially low right now. Do you think Wal-Mart and McDonald’s and Coca-Cola are worth half of what they were a year ago? Of course not. It’s being driven by fear. In 100 percent of every 15-year period, the stock market has made money.”

In other responses, he said smaller banks are safer than giant banks and that gold is a poor investment, even in a failed economy.

Ramsey, who has had millions of people take his 13-week Financial Peace University Course, urged his listeners to pay off all their debt and build up a six-month emergency fund before investing. He admitted that not every one agrees with his view of the economy.

“You know, Christian hate-mail ought to be an oxymoron,” he joked. “I don’t mind it, I just find it funny when someone quotes a Scripture before they tear my head off.

“Don’t believe everything that comes in front of you or everything you hear, even from me,” he said. “All I want you to do is learn to think for yourself.”

The town hall event was sponsored by Ramsey’s Financial Peace University and the Fox Business Channel.

Source: reporternews

Wharton financial professor and author of The Stocks  for the Long Run, Professor Jeremy Siegel predicts the global economy will turn around by the second half of 2009. The most significant cause of the downturn, according to Siegel is that financial firms bought, held and insured large quantities of risky, mortgage-related assets on borrowed money.

Due to deliver a keynote address at the first-ever Wharton Global Alumni Forum to be held in the Middle East from March 11-12, 2009 in Dubai, Professor Siegel is an expert on macroeconomics, financial markets, long-run asset returns and demographics.

“During dot-com IPOs of the early 1990s, the firms that underwrote the stock offerings did not hold on to those stocks,” says Siegel as quoted on Knowledge@Wharton, the Wharton School’s journal of business analysis. “They flipped them. But in the case of mortgage-backed securities, the financial firms decided these were good assets to hold. That was their fatal flaw.” >more

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