China Manufacturing Falls To 3 Year Low

A day after its currency joined IMF’s elite club of reserve currencies, China announced that its manufacturing activity fell to its lowest level in three years. The country’s official Purchasing Manager’s Index, a broad survey of manufacturing firms across the country, fell to 49.6 in November, down from 49.8 a month earlier. That figure missed economist estimates by 0.3 percentage points. Another manufacturing index – this one focused on export firms – ticked up to 48.6 in November, up from 48.3 the previous month.

According to economists, two factors are responsible for the decline in manufacturing activity: overcapacity and sluggish domestic demand. The latter factor is especially important for China as it reorients its economy towards domestic consumption. As a result, the share of services as a component of the economy increased to 51.4%, up from 49.1% during 2014. The country’s economy is expected to grow by 7% this year, and the weak readings could spur another round of interest rate cuts and stimulus spending by the Chinese government to achieve its target.

Fed Adopts Rule to Curtail Bailout Amounts

Too big to fail?

The Fed may not be able to help you next time you need a bailout. The agency yesterday adopted a new rule that puts limits on the amount that its emergency lending unit can disburse to help distressed firms.

The new rule prohibits the Fed from lending or assisting a single firm, such as Bear Sterns or American International Group Inc (AIG), for a bailout. Instead, the rule mandates that the emergency lending unit can assist only entire markets or sectors of economy. As such, there should be at least five potential recipients of the Fed’s largesse, according to a report in the Wall Street Journal. It also places onus on the agency to make sure that there is sufficient collateral (insolvent institutions and entities will not be eligible for the loans) to ensure recovery of its loans.

The rule is largely based off Sen. Elizabeth Warren (Dem., Mass.) and Sen. David Vitter’s (Rep.,La) legislation suggestions. Senator Warren said that “loopholes” still existed for the Fed to provide “another back-door bailout to giant financial institutions.” Sen. Jeb Hensarling (Rep., Texas) said the final rule compounded the “moral hazard problem that lies at the core of ‘too big to fail.'”

Thanksgiving Sales Increase

An increase in numbers for online shopping fueled an overall sales numbers increase on Thanksgiving, according to data from research firm First Data Corp. Online sales increased by 24% as compared to the previous year on Thursday morning. Overall sales numbers for Thanksgiving seem to have followed suit, increasing to 9.4% on Thursday and Friday. That number represents an increase 0.6% from previous year numbers. But, certain categories, such as consumer electronics and furniture goods, lost out on their share of the overall pie as the average order size for these items fell.

According to RetailNext, another analytics firm, big box retailers witnessed a 1.4% decline in overall spending per customer. In an interview with the Wall Street Journal, Bridget Johns, head of marketing at the firm, said that Black Friday shoppers were selective in that they were “looking for those one or two key items they know are on promotion, and they are doing less impulse spending.”

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