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Doubts About The Strength Of The Global Recovery Send Stocks Lower

By: Dr. Mike Campbell

All of the major stock exchanges lost ground yesterday; by as much as 3%. The latest bout of investor nervousness has been attributed to poor manufacturing output in Europe, China and the US. This shouldn’t really come as a huge surprise since just about every analyst worthy of the name in 2009 was pointing to a slow and patchy recovery in 2010. However, it seems that investors have short memories and weak stomachs.

China has been seen as the powerhouse of the global recovery, but the latest Purchasing Manager’s Index (PMI) which indicates manufacturing output, has declined by 1.8 from May to 52.1 last month. A reading above 50 shows expansion, but the fact that the rate has dropped has led some to conclude that the Chinese economy is cooling (a situation being actively called for just a few months ago, to curb inflationary pressure and to prevent a Chinese bubble from inflating). Manufacturing output also fell in India and South Korea; raising concerns abut the strength of the global economy.

The PMI also fell in Europe and this has been attributed to the effect of government austerity measures, but it is perhaps premature to jump to this conclusion now. This is the second straight month of decline in the PMI figure for Europe, so it is possible that the sovereign debt crisis is having an impact on output. In the USA, the Institute for Supply Management also reported a slow down in US manufacturing.

Dr. Mike Campbell
About Dr. Mike Campbell
Dr. Mike Campbell is a British scientist and freelance writer. Mike got his doctorate in Ghent, Belgium and has worked in Belgium, France, Monaco and Austria since leaving the UK. As a writer, he specialises in business, science, medicine and environmental subjects.

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