China PMI at One Year High
Chinese manufacturing, measured by end-of-month PMI (Figure 1.1), rose to its highest level in one year, and was reported at 53.1 on Saturday evening, March 31, 2012. The figure was well ahead of the 50.5 analysts had estimated and last month’s 51.0.
As I wrote last week, the HSBC Flash PMI should not be considered the most accurate indicator of Chinese manufacturing conditions; rather, end-of-month PMI is the correct measure to follow.
In addition, this report provides evidence that fears of a significant contraction in Chinese growth are baseless. Rather, as export demand softens, a government-engineered housing slowdown and modestly slow GDP have given Chinese central bankers plenty of room to ease further and support growth. The strength of this report allows them to keep their much-needed powder dry.
The next market-moving economic data release from China is the release of CPI (Figure 1.2) on Sunday, April 8, at 9:30 p.m. Estimates for that figure are a modest rise to 3.5% from 3.2% last month – well below the 6.5% print of late summer 2011. Based on the “Input prices” component of China PMI, I suspect the CPI print will be vulnerable to a print above the 3.5% consensus estimate.
Inside the past weekend’s China PMI, investors will find:
• New orders (Figure 1.3) rose to 55.1 from 51.0 last month
• New export orders (Figure 1.4) rose to 51.9 from 51.1 last month
• Input prices (Figure 1.5) rose to 55.9 from 54.0 last month
Figure 1.1 China PMI, 3/31/10 to Present
Figure 1.2 China CPI, 3/31/11 to Present
Figure 1.3 China PMI New Orders, 3/31/10 to Present
Figure 1.4 China PMI New Export Orders, 3/31/10 to Present
Figure 1.5 China PMI Input Prices, 3/31/10 to Present