All attention this week has been on the Federal Reserve which has responded as most people expected; a continuation of Operation Twist and a downgraded economic forecast. However, the latest Chinese manufacturing data and the falling oil prices might actually be a better indicator of the world’s economic performance and future outlook. Being the manufacturing hub of the world, any slowdown in manufacturing is a sign that demand from abroad has been falling. Furthermore, it also indirectly confirms the fact that demand in the Euro Zone is still falling since the Euro Zone absorbs most of China’s exports. Oil price, which is an indicator of the word’s economic health has also been on a decline and also signals very weak global demand and production.

Chinese manufacturing sector has contracted for the eight month in a row with the latest data showing orders and prices at their weakest since 2009. The HSBC Flash Purchasing Managers Index has fallen to a seven month low and is below 50 (indicating contraction). The Chinese government is hoping that the recently launched construction boost and interest rates cut will allow them to continue on their high growth trajectory. Although HSBS index is important, investors would still need to wait for the official PMI index which also takes into account performances by public companies which is excluded from the HSBS index.

With falling global demand, oil prices have also taken a tumble to reach their lowest point in one and half years. Analysts predict that problems in the Euro Zone would flare up again during the summer and the new low price of oil reflects a pessimistic world economic outlook in the near future. OPEC for the moment also does not see the need to intervene; given the state of the global economy even the current prices are good. To make up for the loss in revenue, countries like Saudi Arabia have been increasing production as well. As of now, it is likely that unless the Euro Crisis is solved, there will be a slow in global growth that will affect all counties from China to the United States.