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China Flash Manufacturing PMI Posts Modest Improvement Even As It Contracts For 12 Months In A Row

Tyler Durden's picture





 

Those holding their breath that the PBOC will finally relent and join its "developed world" central planning colleagues in easing - something the tech companies of the world, not to mention everyone else, desperately needs - will have to do so for quite a bit longer (and today's earlier latest reverse repo was merely confirmation of this). The reason is that the just released HSBC Flash PMI for October, the first preliminary snapshot of Chinese data, posted a material rise from 47.9 to 49.1. Yes, this was the 12th consecutive print in sub-50 contraction territory in a row, but the direction is one which may give the economy and the people hope that things are getting better. They most certainly are not, but remember: in China every data point is massaged, manipulated, and then massaged some more before it is finally telegraphed to represent only what the Politburo wants it to say. And as a reminder, China, like the US, has elections (in quotes of course) in two weeks. As such neither the economy will tip the boat, nor the PBOC will drive more inflation at a time when everyone else is already easing. In other words: goldilocks goalseeked data... which for the monetarists was the worst possible outcome, as it means no new and free money.

A chart of HSBC vs Official PMI data:

From HSBC:

Output falls at slower pace in October

  • Key points
  • Flash China Manufacturing PMI™ at 49.1 (47.9 in September). Three-month high.
  • Flash China Manufacturing Output Index at 48.4 (47.3 in September). Three-month high.

Data collected 12–22 October 2012.

The HSBC Flash China Manufacturing Purchasing Managers’ Index™ (PMI™) is published on a monthly basis approximately one week before final PMI data are released, making the HSBC PMI the earliest available indicator of manufacturing sector operating conditions in China. The estimate is typically based on approximately 85%–90% of total PMI survey responses each month and is designed to provide an accurate indication of the final PMI data.

Commenting on the Flash China Manufacturing PMI survey, Hongbin Qu, Chief Economist, China & Co-Head of Asian Economic Research at HSBC said:

“October’s flash PMI reading continues to recover for the second month, thanks in part to a gradual improvement in the new orders index which picked up to a six-month high (albeit marginally below 50). This is helped by the filtering-through of the earlier easing measures. However, external challenges are still abound and the pressures on job market are lingering. This calls for a continuation of policy easing in the coming months to secure a firmer growth recovery.”

 


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Tue, 10/23/2012 - 22:05 | Link to Comment fonzannoon
fonzannoon's picture

Meh. Bernanke must be sweating his bald head off tonight. It's all him tomorrow. He has to convince the capital markets his bullshit is still the driving force. Reality and now earnings are saying otherwise. No pressure dickface.

Tue, 10/23/2012 - 23:34 | Link to Comment Pareto
Pareto's picture

+1 for "no pressure dickface" 

Wed, 10/24/2012 - 09:20 | Link to Comment TruthInSunshine
TruthInSunshine's picture

China has one priority above all else, and that is to keep as many citizens working as possible, at all costs.

This may mean the Chinese Central Planners ramp up subsidies to existing producers in order to incentivize them to increase (or maintain) production, or ramp up subsidies to a wider swath of corporations, foreign and domestic, to build out new production facilities in China, or do a whole host of similar things, whereby the central AND provincial governments stimulate hiring and production.

In China, the one thing the party leaders fear above all else is internal social unrest brought on by rising unemployment. Few people outside of China fully appreciate how critical and sensitive an issue this is in a nation with the population, culture, social and political order, and demographics of China.

They will never truly float their currency for this reason, no matter how much pressure is applied to them by whomever.

From the Chinese perspective, their focus on this matter as a priority above and beyond all else is perfectly logical.

Tue, 10/23/2012 - 22:09 | Link to Comment lizzy36
lizzy36's picture

Odd that these numbers are so different that what CAT was saying today.

Tue, 10/23/2012 - 23:17 | Link to Comment Harbanger
Harbanger's picture

You can believe China's data numbers like you can believe Obama's jobs numbers.

Wed, 10/24/2012 - 00:00 | Link to Comment DoChenRollingBearing
DoChenRollingBearing's picture

WE are selling lots of Chinese "Hub & Bearing Assemblies" in Peru now.

Precios, putaz!

Tue, 10/23/2012 - 22:14 | Link to Comment earleflorida
earleflorida's picture

"Constructive `Nth' Ambiguity"... via natural selection?

http://en.wikipedia.org/wiki/Constructive_ambiguity

thankyou tyler

Tue, 10/23/2012 - 22:36 | Link to Comment Dr. Engali
Dr. Engali's picture

It's a bitch when you run out of empty cities to build.That upkeep is going to get expensive.

Tue, 10/23/2012 - 22:53 | Link to Comment Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Upkeep?  Have you seen where they held the Olympics?  It's deserted.

Tue, 10/23/2012 - 22:56 | Link to Comment q99x2
q99x2's picture

Empty cities need empty cars and jets for the empty airports. Hey maybe they will start recruiting out of Washington DC for some empty politicians.

Tue, 10/23/2012 - 23:22 | Link to Comment Mr Lennon Hendrix
Mr Lennon Hendrix's picture

China has enough empty suits.  They don't need ours.

Wed, 10/24/2012 - 00:31 | Link to Comment HaroldWang
HaroldWang's picture

Other than NFLX, pretty solid earnings AH today. If we get something decent tomorrow before the market, we could see a complete about face turn around chase, full on rally on this China data. 

China hit the numbers "perfectly" - getting better is good for the market whereas getting worse would have been bad if no Chinese intervention. So...looks like the "perfect" scenario is setting up for a morning blowout rally, then fade.....

Wed, 10/24/2012 - 01:05 | Link to Comment Youri Carma
Youri Carma's picture

"China, like the US, has elections"

Didn't know they actualy had elections in China nor in the U.S. for that matter cause what's there to choose?

Like in: You can choose any color you want as long as it's red.

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