Late Sunday, July 31, the National Bureau of Statistics released July’s China Purchasing Managers’ Index (PMI). I expect this report to continue to be a leading indicator for global growth as it has since the winter of 2009. This report was highly anticipated as consensus estimates feared a number below the contraction/expansion line of 50. The last reading below 50 was 49 in the February 2009 report, released February 28, 2009.
July China PMI
• July China PMI was 50.7, below June’s 50.9 but ahead of estimates 49.0 to 49.9
• New Export Orders Index was 49.7%, up from June’s 49.1%, a leading indicator for G7 consumer demand and still tepid
• Imports Index was 50.1%, above June’s 48.2%, signaling domestic demand might reaccelerate
Commentary: Evidence within this report suggests the People’s Bank of China remains in a monetary tightening phase. However, I expect that cycle will end in the next 30 to 60 days. China’s Consumer Price Index will be released next Monday, August 8, at 10 p.m. Eastern. Last month’s 6.4% CPI was the highest reading since July 2008. Moderation in China CPI will be necessary to signal an end to monetary tightening.
China PMI, August 31, 2008 to August 1, 2011