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China HSBC PMI Misses, Prints At Four Month Low

Tyler Durden's picture




 

While the rest of the world was blissfully enjoying its latest reflation experiment, one country that has hardly been quite as ecstatic about all the blistering free money entering its real estate market (if not so much the Shanghai Composite) still warm off the presses of the G-7 central banks, has been China. Because China knows very well that while in the rest of the world, free money enters the stock market first and lingers there, in China the line between the reflating house market and the price of hogs - that all critical commodity needed to preserve social stability - is very thin. As a result, last week China withdrew a record CNY900 billion out of the repo market - the first such liquidity pull in eight months. This move had one purpose only - to telegraph to the rest of the world that the nation, whose central bank has patiently stayed quiet during the recent balance sheet expansion euphoria, will no longer sit idly by as hot money lift every real estate offer in China. Moments ago we got the second sign that China is less than happy with the reflating status quo, when the HSBC Flash PMI index for February missed expectations of a 52.2 print by a big margin, instead dropping from the final January print of 52.3 to just barely above contraction territory, or 50.4. This was the lowest print in the past four months, or just when the PMI data turned from contracting to expanding in November of last year.

While we won't know for sure if it is officially China's stance that the rest of the central bankers must back off now until the other PMI number is released, the official Chinese sourced one, it is quite likely that the official February print will be just as weak if not more. Recall that as the chart below shows, January official PMI already posted not only a major miss to expectations, but a decline. As such today's HSBC drop merely cemented what the official data was already telegraphing.

If indeed the official PMI print comes well below expectations, or is even negative, then just like in 2011, the reflation party is slowly but surely ending, as the world's marginal economy - not only in terms of growth but of hot money attraction - says no more.

This is how the official Chinese data and the HSBC PMIs appear on a side by side basis over the past several years:

Even as the headline and Production indices posted just a barely positive reading in February, already four sub-indices were in contraction territory:

Visually, from the MarkIt report:

And of course, since a miss in the PMI destroys the house of cards "recovery" strawman so carefully built by the Wall Street sell side for months and months, here comes the first defense of the miss. It is from Barclays, whose logic is that since the Chinese New Year fall in February, the PMI was obviously going to miss. Of course, what they fail to mention is that everyone else knew that this particular calendar oddity would take place in February, and thus could adjust their expectations accordingly. But only in retrospect, it appears, is what is glaringly obvious now, should have been so glaringly obvious when other firms were setting their HSBC PMI expectations.

From Barclays:

  • HSBC flash manufacturing PMI fell to 50.4 from 52.3. We have been highlighting to watch for March, when the NBS PMI (out on Mar 1), could fall to below 50 (we forecast 49.6) from 50.4 in Jan, owning to CNY effects when factories are closed. The NBS PMI has always posted a m/m decline when the CNY falls in Feb. While the HSBC PMI exhibits less seasonal trend (or say better seasonally adjusted), we have talked about that there are fewer official working days this Feb (17) than Jan (22).
  • Seeing beyond Jan/Feb distortions, we think China’s growth recovery remains on track at the beginning of the year, supported by restocking (from the supply side) and domestic demand with continued investment and robust consumption growth as evidenced by the CNY sales. But we are not expecting strong rebound given external uncertainties and we maintain our below-consensus growth forecast of 7.9% for 2013.
  • Surging Jan total social financing & credit expansion should not be sustained. While growth remains fragile given the external uncertainties, loose monetary conditions, coupled with strong investment impulse by local government and widely talked 50%y/y increase in fiscal deficit in 2013 (to CNY1.2trn) are adding to the risk of possible overheating, inflation pressures, and risk of tightening (one way or another) and slower growth later this year. We had been looking for some tightening of shadow banking activities in 2013 and stricter regulation on local government financing and slower new loan growth in the coming months. But our moderate growth-inflation profile.
  • Money market rates have come down recently. To stablise liqudity/rates, the PBoC last week has resumed the repo operations despite significant amount of reverse repo maturing . This evidences loose monetary conditions (partly related to the CNY) and also likely capital inflows. This year, more so than last year, China will face the challenge of balancing growth and inflation risks. External weakness poses downside growth risks and domestic investment impulses post the leadership transition could add to upside risks. The PBoC (now that Governor Zhou likely stays on at least for a while) will face the challenge of continuing to push forward financial reforms (more liberalized interest rates, more flexible exchange rate and further opening capital account) amid capital inflow pressures under the QE

So you must please ignore this data: after all, it, along with virtually every other data point in the past several weeks has been a major miss, which means that one should not pay any attention to it. As everyone knows, in the New Normal only upside beats matter.

 

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Sun, 02/24/2013 - 23:15 | 3272946 knukles
knukles's picture

Haw slucks.

 

(sound of snapping fingers)

Sun, 02/24/2013 - 23:24 | 3272963 ihedgemyhedges
ihedgemyhedges's picture

Shizzle about to get real. Hedge accordingly........

Sun, 02/24/2013 - 23:43 | 3272995 DJ Happy Ending
DJ Happy Ending's picture

Chinese numbers are the biggest joke of all.

Sun, 02/24/2013 - 23:52 | 3273020 knukles
knukles's picture

Si.
There's no way under the sun a country that big at that stage of development can get anything like a real handle on true data.  Lotta estimates, wind-ages and close enufs for peasantry work.

That being said however, at whatever stage of development it be, if consistently accumulated, then trend should be reasonably apparent.

And in any case, as the rest of the world slows, so's gonna China since thay are the world's supplier of anything not edible for the Global Free Shit Army
Go figure.

Mon, 02/25/2013 - 03:11 | 3273335 StychoKiller
StychoKiller's picture

Arrggghhh!  I just wanna backhand anyone that comes up with such a lame excuse!  The Chinese New Year is pretty much always in February!

Mon, 02/25/2013 - 08:54 | 3273536 aint no fortuna...
aint no fortunate son's picture

aaaaannnnnddddd cue.... Shanghai S shares rally

Sun, 02/24/2013 - 23:16 | 3272952 Yen Cross
Yen Cross's picture

  Sweet

Sun, 02/24/2013 - 23:18 | 3272954 Temporalist
Temporalist's picture

OT Isn't this exactly what the central bankers want?

Eight million Britons have no savings, study reveals

Another 15 million 'making no effort' to save for the future according to research which also shows a rise in parental loans

http://www.guardian.co.uk/money/2013/feb/25/millions-britons-without-fut...

Sun, 02/24/2013 - 23:25 | 3272965 Divided States ...
Divided States of America's picture

Dont worry, their savings are in the good hands of the bankers and aristocrats

Mon, 02/25/2013 - 01:03 | 3273191 TruthInSunshine
TruthInSunshine's picture

There are those 8 million Brits with no savings (and probably another 20 million elderly with less than 25k USD), and here in Amerika:

 

More Americans delaying retirement until age 80 - Oct. 23, 2012

@CNNMoney October 23, 2012

As a result, there's a huge disparity between what people need and what they have saved. While respondents said they will need a median of $300,000 in total savings to support themselves in retirement,  **the average amount saved is only $25,000.


America's Retirement System Is Failing Us: Economist

**The majority of Americans (75 percent) nearing retirement age had less than $30,000 in their retirement accounts in 2010. For the poorest Americans in the 50-to-64-age bracket, the average amount saved for retirement was $16,034.


Why You Might Not Want to Be an “Average” American | CIF

Even scarier is the report from LIMRA that indicates ** half of Americans aren’t saving for retirement. At all. That means that the average American isn’t even saving for retirement. Those in the younger age bracket of 18 to 34 aren’t really saving, either: 56% are not saving at all. Only about 1/3 of Americans starts putting money aside for retirement in their 20s, according to a report from Bankrate.

 

But Zero Hedge reported on all this a few months ago, in bullet-item form:

Retirement: The Scary Actual Numbers Behind The Soothing Lies ... - Zero Hedge

  • Only 58% of us are even saving for retirement in the first place. Of that group, 60% have less than $25,000 put away, not including home equity or defined benefit plans. Even worse, **a full 30% have less than $1,000. A meager 10% have $250,000 or more. (For comparison’s sake, a quick survey of different retirement advisors’ websites showed that the average recommended savings is about 8x-10x final salary – by some estimates, around $1 million)
  • While these low savings might be expected of the youngest age cohort, **almost half (48%) of workers ages 45 and up have less than $25,000 saved.
  • Savings rates and the amount saved are strongly positively correlated to education, income, and health status. 93% of those making more than $75,000 are saving, compared to 35% of those with and income of $35,000 or less.
  • Only 38% of all American workers participate in an employer-sponsored retirement savings plan. That said, only 74% are offered this kind of plan. Of those that choose to participate (81%), savings and investments typically total at least $50,000.
  • 34% of workers that had saved said they have had to dip into their savings to pay for everyday expenses. 22% of retirees claim they’re taking more than they thought they would out of their accounts, depleting their savings even faster than they anticipated.
  • Overall it’s a pretty bleak picture. On the whole, Americans are hugely underprepared for retirement, leading quite a few of them (22%) to put off retirement to a later date, or not retire at all (7%).
Mon, 02/25/2013 - 03:14 | 3273338 StychoKiller
StychoKiller's picture

Hmm CDs paying around 0.75% (if you're lucky!), and people are supposed to save??  WTF?

Mon, 02/25/2013 - 05:24 | 3273414 CheapBastard
CheapBastard's picture

The postal rate increases, real inflation running at 6%, and the internet sales tax matched by the 0.01% yield on their retirement savings accounts paints a bleak picture for many, esp seniors whether or not they have saved.

Sun, 02/24/2013 - 23:32 | 3272974 EclecticParrot
EclecticParrot's picture

Hmm .... China smirks at the world, as one might toward a younger sibling about to misbehave and says "oh, no you don't  --  no so fast, little one."

Stateside reaction:  "First the hacking evidence, and now these manipulated figures.  Equity markets must be ramped immediately -- to do otherwise would be un-American."

Mon, 02/25/2013 - 07:55 | 3273479 samcontrol
samcontrol's picture

lol, you probably think China can rule the world.

that system sucks more than yours.

Sun, 02/24/2013 - 23:45 | 3273000 espirit
espirit's picture

HSBC?  Come on now, the name to trust?

Sun, 02/24/2013 - 23:46 | 3273002 pleseus
pleseus's picture

China's best manufacturing days may be behind it.

Sun, 02/24/2013 - 23:48 | 3273006 Divided States ...
Divided States of America's picture

Not when it comes to manufacturing fudged economic numbers....

Sun, 02/24/2013 - 23:59 | 3273032 ebworthen
ebworthen's picture

Contraction...not...possible!

Must...expand...forever...defy...nature...

...must....smash iPhone 5...and...some...windows...

Mon, 02/25/2013 - 00:02 | 3273042 chump666
chump666's picture

False flag any-day now:

http://www.chinadaily.com.cn/cndy/2013-02/25/content_16252369.htm

The two massive Keynesian failures, China and Japan, will look to the ultimate Keynes psychosis: war

Mon, 02/25/2013 - 00:19 | 3273085 uncle_vito
uncle_vito's picture

China PMI was right where they wanted it.   Markets should rally.

Mon, 02/25/2013 - 01:12 | 3273208 They Tried to S...
They Tried to Steal My Gold's picture

I guess it's just perfect that if we are going to live in a land of make beleive - that GOLD is the only saviour...

 

Hard to tell who is worse the Analysts or the Central Bankers either way they truly are:

 

THE COURT JESTERS

Mon, 02/25/2013 - 01:21 | 3273221 Yen Cross
Yen Cross's picture

 Meanwhile?  Back in reality, I'm watching 2 year bond spreads.

Mon, 02/25/2013 - 01:47 | 3273252 q99x2
q99x2's picture

Chinese junked junk.

Mon, 02/25/2013 - 01:51 | 3273260 Notarocketscientist
Notarocketscientist's picture

Can you BELIEVE THIS!!!!!

 

Such losses would lead to a political storm on Capitol Hill and risk a crisis of confidence. The paper -- "Crunch Time: Fiscal Crises and the Role of Monetary Policy" -- is co-written by former Fed governor Frederic Mishkin, Ben Bernanke's former right-hand man.

http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/989108...

Mon, 02/25/2013 - 03:07 | 3273330 trebuchet
trebuchet's picture

This one prompted US Fd officials to dump wrath on it ad "poo poo" its quality of analysis etc

Mon, 02/25/2013 - 03:04 | 3273327 trebuchet
trebuchet's picture

New export order decline, work backlog decline, destocking of purchases and finished goods =  next month, negative print; this month in other coutnries around the world, decline or slower rate of growth.

Now who is long Aussie?

 

 

 

 

Mon, 02/25/2013 - 04:44 | 3273397 Yen Cross
Yen Cross's picture

 The Australian A$ is a proxy for "Hot Money" in secondary Asian markets. That correlation can't find a fix.

 Old school euro, then spx, now lost in the bond market. Look @ Aus 10 year yields. Just under 4%. ( Milking short term yield) I suspect. Hence the strong aussie dollar inflows offset by small ACB rinse wash, as the USD is way over bought, and the Sterling is going to SHORT SQUEEZE!

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