China PMI was reported at 50.4, down from last month’s 51.2 and below consensus estimates for 51.8. This figure is the lowest reading since February 2009. The disappointment is that activity growth did not snap back sharply. Many, including myself, had anticipated Chinese growth was about to reaccelerate.
I caution investors not to view this figure as an overtly bearish reading, however. Within the report, it is very positive that the Input Price Index fell to 53.0 from 58.1 last month. That decline is suggestive of further cooling in the upcoming China CPI. Priority number one for the People’s Bank of China is moderation in inflation figures. Moderating inflation clears the path for a shift from the 2011 policy of monetary tightening to potential easing in 2012.
MARKET CONSEQUENCE: China PMI is not good enough to return the market to an appreciative path. The focus now shifts to China CPI, which will be reported at the end of next week.
China PMI, February 2009 to November 2011
Past performance is not a guarantee of future results.
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