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China PMI kicks off 2012 Investing Year

01/03/2012

China Purchasing Managers’ Index (PMI) reported a 50.3 for the month of December:
•  Last month’s figure was 49 (for November).
•  Estimates were for another sub-50 (contraction/expansion line) figure of 49.1.
 
China PMI does impact global capital market performance:
•  PMI average for 2008 was 50.2.
•  PMI average for 2009 was 52.9.
•  PMI average for 2010 was 53.8.
•  PMI average for 2011 was 51.4 (Figure 1.1).
 
Commentary: The People’s Bank of China has a near-term decision to make. . . . Does the PBOC further reduce banks’ reserve requirements (RRR) (Figure 1.2) ahead of January 23, the start of the weeklong Chinese New Year? I EXPECT YES. The PBOC’s focus is now squarely on boosting domestic growth in the face of a European slowdown that is reducing demand for Chinese exports.  
 
Inflation (Figure 1.3) has moderated significantly and the PBOC can now focus on growth. China GDP (Figure 1.4) has been trending downward, and I would expect a sub-9% print will be reported late in the evening of January 12.
 
 
Figure 1.1 China PMI 2011

Source: Bloomberg
 
Figure 1.2 Reserve Requirement Ratio (RRR), December 2010 to January 2012

Source: Bloomberg
 
Figure 1.3 China CPI, January 2010 to January 2012

Source: Bloomberg
 
Figure 1.4 China GDP, December 2009 to January 2012

Source: Bloomberg

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