The China Purchasing Managers’ Index (PMI) rose to 50.5 for the month of January, maintaining above the contraction/expansion line of 50. Last month the Index was reported at 50.3. Expectations were for a decline this month below 50 to 49.6.
Although the People’s Bank of China did not further ease monetary policy at the end of January, this report is evidence that the end of 2011’s easing efforts have helped the Chinese economy avoid a hard landing. However, there is a seasonal distortion in this reading as the Lunar New Year holiday from January 22 to January 28 may have artificially increased the contribution for domestic demand.
Also reported today in China, house prices declined for the fifth consecutive month. The easing in property prices is being successfully engineered by government officials.
Most importantly the value of the yuan continues to strengthen – currently at 6.3067 per dollar – which is a favorable condition for all global risk assets.
China Yuan, July 2011 to present