In China there was a hint of a slight easing in the growth in the country’s manufacturing sector.
The Purchasing Manager’s Index fell to a seasonally adjusted 53.1 in May from 53.5 in April, according to a statement from the Federation of Logistics and Purchasing in Beijing and reported on Bloomberg and Reuters.
Readings above 50 indicate expansion in this type of survey and the slowing in the rate of expansion in May was the first for three months.
It was enough to send Asian markets higher, with China’s hitting a 10 month high, up 3.6% on the day. The surge continued in Europe and in the US where similar readings for manufacturing were reported.
And for the third time this year China will allow petrol and diesel benchmark retail prices to rise to maintain some sort of relationship with the soaring global price of oil and oil products.
Xinhua Newsagency said The National Development and Reform Commission (NDRC) said the new prices would apply from today and would mean a 7% rise in the benchmark retail price for petrol and an 8% rise in the diesel retail benchmark price.
It is the third oil price adjustment this year; the latest was in late March when prices rose by around 2% to 3%.
Under a new pricing mechanism that started January 1, China’s domestic prices are to be "indirectly linked" to global crude prices "in a controlled manner".
Xinhua says China will adjust domestic fuel prices when global crude prices reported a daily fluctuation band of more than 4% for 22 working days in a row.
Oil prices jumped 30% last month on futures markets, so the Chinese price rise is nowhere near meeting that lift, or the 100%-plus surge in world prices since the start of the year (the total price rise is between 10% and 15%).
But seeing Chinese producer and consumer price inflation is deeply negative, there’s no inflationary consequences from the allowed increases, which are really designed to let state-owned oil companies recover some of the higher cost of imports from consumers and business.
But in Japan, more confirmation of the depths of the recession and why claims that the economy is on its way back, are too early.
A strong rise in industrial output in April saw claims the Japanese recession had steadied, and the economy would now start turning. But those claims ignored the most obvious question. What will power it?
Retail sales are still falling, a big real estate company went bust on Friday because the property market is weak, unemployment hit a five year high in April and now news that wages in Japan have fallen for 11 consecutive months.
With deflation at consumer and producer levels intensifying, there’s no reason to think that Japanese consumers are going to start spending and that’s despite an improvement in consumer confidence.
Those figures yesterday said the 11 months of falling wages is the longest contraction since 2003, at the end of the previous (mild) slowdown in Japan.
The country’s Labour Ministry said that monthly wages, including overtime and bonuses, dropped 2.5% in April.
That was better than the 3.9% fall in March, but after 11 months of falls, the improvement was marginal.
Overtime dropped 18.8% after a record 20% fall in March, which is not hard to understand given the 31% contraction in production in the past year.
Extra working hours fell 45.3% in April after a record 49% fall in March, which is again not hard to understand given the intensity of the recession still gripping the country’s economy.
And South Korean exports and imports in May both dropped more than expected, putting a further dampener on claims for an early recovery in the economy.
