Bloomberg is reporting China's Manufacturing Contracts for Second Month.



Manufacturing in China, the world's fastest-growing major economy, contracted for a second straight month in August, according to a survey of purchasing managers.



The Purchasing Managers' Index was a seasonally adjusted 48.4, unchanged from July, the China Federation of Logistics and Purchasing said today in an e-mailed statement.



Since July, Chinese policy makers have put extra emphasis on sustaining the economy's expansion rather than cooling inflation. Growth has slowed for four quarters and Vice Commerce Minister Gao Hucheng said last week that weakness in global demand will weigh on China's exports for the rest of the year.



"This suggests economic growth will continue to slow," said Sun Mingchun, an economist at Lehman Brothers Holdings Inc. in Hong Kong.



The output index rose to 48.7 in August from 47.4 in July, while the index of new orders fell to 46 from 46.2. The index of export orders climbed to 48.4 from 46.7.



The index of input prices dropped to 57.8 from 71.3, "which may mean that producer prices have already reached a peak," said Lehman's Sun.

Global Hangover Hits China

Is China In Recession?

While everyone points to economic trouble both here and in Europe, I haven't heard many talking about the Chinese economy. I hear a lot about their stock market, but not much about the Chinese Purchasing Managers Index, which is plunging into negative (contraction) territory.







This is likely as much behind the fall in oil as Gustav not being as nasty as many think. So the recession is now most likely global. Stocks can stay bid for a while, but be careful, folks. Prices are likely to be very technical and thin.

On other boards I am reading, many are anticipating a huge jump in oil and gas prices next week. I do not know if that will happen, but I will offer the opinion that if it does not happen, or if it happens and prices quickly reverse lower, they will keep going a lot lower than most energy bulls think.



Short to intermediate term, it is highly likely that the slowing global economy will have far more effect on energy prices than peak oil.

October Crude Weekly