PMIs Confirm China And Japan Economies In Contraction

Tyler Durden's picture

China's HSBC Manufacturing PMI has now spent 3 years within 2 points of the crucial '50' demarcation between contraction and expansion but as the following chart shows, something seems 'odd' about the last few months apparent stability. Tonight China HSBC PMI printed a stunning 49.7 crushing the expectation of 48.3 (modestly above last month's 48.1) but still in contraction for the 5th month in a row (the longest contraction since Oct 2012). This was China's biggest spike in PMI in 9 months led by increases in new orders, production, and new export orders... but employment fell to new lows. Japan's Markit PMI also printed in 'contraction' territory for the 2nd month in a row - its first since Abenomics began.


One of these things is not like the other (blue is the soft-survey data from HSBC's manufacturing PMI; the histogram is hard-data-based macro surprise index from Citi)


But HSBC PMI did show contraction for the 5th month in a row and remains notably below the government's official version - which is in expansion...


The breakdown of sub-indices is mixed...


But the employment sub index continues to accelerate lower... Welcome to China's jobless recovery



Japan printed its first 2 months of contraction since Abenomics began...


This does not bode well for the majority of Japan's economic indicators...


As the sub-indices were not exactly encouraging


Markit on Japan...

“The manufacturing sector showed welcome signs of stabilising after the steep downturn seen in April, but producers are clearly still struggling as demand has been hit by the April 1st tax hike. Of additional concern is the fall in export orders, which is a sign of softening demand in key trading partners. GDP growth is consequently likely to have weakened significantly in the second quarter.


“While many companies signalled optimism that the slowdown would be temporary, the cutting of prices and downturn in job creation are signs the sector is preparing for continued tough conditions in the coming months. The extent to which the economy can rebound in the second half of the year remains highly uncertain at this stage."

And on China...

However, the employment index fell further to 47.3, which implies that this month's uptick in sentiment has not yet filtered through to the labour market. Some tentative signs of stabilization are emerging, partly as a result of the recent mini-stimulus measures and lower borrowing costs. But downside risks to growth remain, particularly as the property market continues to cool. We think more policy easing is needed to put a floor under growth in the coming months.

Charts: Bloomberg and Markit Economics

The reaction was sublime... 1) no reaction to Japan PMI, 2) huge 'early reaction to China PMI, 3) algos gone wild in S&P futures...

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Slave's picture

"Contractions" are not allowed.

Keynesianism 101

g'kar's picture

Contractions are neccessary in order to give birth to a new, vibrant economy.

Cognitive Dissonance's picture

Release the hounds fiat.

nmewn's picture

Unpossible!...they have a printing press!

hobopants's picture

Needs more pie graph. 

NoWayJose's picture

I didn't believe Chinese economic numbers when they WERE expanding, so why would I believe them now?

Manthong's picture


Inflation is the order of the day, except for minor stuff like wages, savings and business expansion.

NDXTrader's picture

Gee...I wonder who knew this all afternoon as they pressed the buy button

DavidC's picture

Being bearish has never been so hard.


TooBearish's picture

Headline numbers above expectations Tyler, sorry ramp on....

Oldwood's picture

I assume that .2% of some survey implies something or another, but is in actuality meaningless. We are led to believe that markets move on anticipation and that little waves will create big scares that cause precipitous reactions. In reality it seems that nothing moves the market by much. There is no fear, except by us few irrelevant sideliners. The fix is in and bad news is good news and good news is just our everyday propaganda.

When playing monopoly with obviously fake money, there is no real fear of loss. The game goes on and there is always fresh cash to keep the game going.

Fractional banking and fictional money.

Who would have thunk it?


NDXTrader's picture

You've got it right...what's the worse that can happen? They can always print more next month

Hindenburg...Oh Man's picture

Well I'm glad that tomorrow's markets have already been settled!  Why not just call it a day now, and adjust the markets up appropriately?

QQQBall's picture

oooooo - 3-4 bps from expansion. hahahhaha - like they are so exact!  Repeat after me - Japan is totally screwed.

AdvancingTime's picture

The writing is on the wall. Japan is facing a wall of debt that can only be addressed by printing more money and debasing their currency. This means paying off their debt with worthless yen where possible and in many cases defaulting on promises made. Japan's public debt, which stands at around 230% of its GDP and is the highest in the industrialized world.

 The moment the Japaneses stock market fails to rise enough to offset inflation this will turn into a tsunami of  money fleeing Japan and constitute the end of the line for those left holding both JGBs and the yen. This has been a long time coming and I contend the cross-border flow of money leaving Japan is why some stock markets have remained so resilient . When Japan crumbles it will be felt across the world. More on this subject in the article below.

BobRocket's picture



Interesting flight took off from Bangor International Airport, Maine earlier today and just touched down at Mihail Kog?lniceanu International Airport, Romania.


Omni Air flight OAE542


I wonder who was on board this time.

yogibear's picture

The central banksters are in control of the media.

starman's picture

looking like my dick on a cold rainy afternoon!

orangegeek's picture shrinks??