China HSBC PMI Misses; Economy Contracts For 5th Month In A Row

Tyler Durden's picture

Despite this weekend's exuberance over an oddly exuberant "20th month of expansion" official China PMI (survey) given the hard-macro-data that has been exhibited by the reforming nation, it seems China's 'other' PMI (HSBC/Markit - less biased to larger SOEs) just missed expectations (for the 7th month in a row), fell and printed in contraction for the 5th month in a row as China's economy is clearly bifurcating between the have (government's help) and have-nots... (as employment continued to plunge) which are you investing in?

 

The 'official' government PMI - 20th month in a row of expansion, no matter what the macro data says...

 

HSBC PMI remains sub-50 - in contraction for the 5th month in a row and the fact that HSBC China PMI contracted from its Flash print (fina 49.4 vs 49.7 flash) suggests things are not accelerating either.

 

and missed expectations for the 7th month in a row...

 

HSBC/Markit explains...

"...growth momentum looked weaker than suggested in the flash reading as the stocks of finished goods index was revised up to 49.8 from 48.8 in the flash reading. The final PMI reading for May confirmed that the economy is stabilizing, but it is too early to say that it has bottomed out, particularly in light of a weaker property sector. The lack of a sustainable growth momentum warrants stronger policy support. We expect both monetary and fiscal policy to be loosened gradually over the coming months."

Tomorrow you will read about how great it is that this PMI rose from 48.1 (last month's print) and how that confirms the China is recovering meme... remember 1) that is below 50 and thus in contraction, 2) that is below the flash print which means things got materially worse in the last 2 weeks, and 3) it's all made up anyway.

 

Most desks tend to believe that HSBC's PMI is more indicative of the true state of commerce in the broad economy - in light of liquidity restrictions for all but the largest and most favored SOEs.

Employment at manufacturing companies declined again in May, as has been the case since November 2013. The rate of reduction was marked overall, and partly driven by company down-sizing policies.

Charts: Bloomberg

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Dr. Engali's picture

They still have some to change it to the correct expansionary number before U.S. markets to open. They can even throw in some seasonal adjustments for the robots and start a monster Tuesday rally.

NoDebt's picture

"Tuesday, Tuesday TUESDAY!  See nitro-burnin' funny cars, wheeeeeeeeel standers and jet cars at Wall St. Raceway!  The greatest POMO race event in the county!  Bring the kids!  We'll sell you the whole seat...... but you'll only need the edge!"

Obchelli's picture

What I do not get with China - How is it possible that PMI shows contraction for 5 months in a Raw and all economists official or independent never question GDP growth north of 7.5%... Numbers just do not add up...

Wild Theories's picture

Manufacturing is just one sector of an economy.

Important, sure, but not the only sector.

NoDebt's picture

.... Sending them into the waiting arms of the only real "safe haven,"  US Treasuries.  And maybe just a smidge into SPOOS.  "Just the tip."

NoDebt's picture

OK, see, that's just uncalled-for.  I said "just a smidge" and "just the tip."  Those kinds of wild prognostications and hyperbole give all of us tinfoil-hat-wearers a bad name.  Just.... tone it down a little, knock one of those zeros off the end and you could be the next Dick Bove.  

Green arrow.  But I'll be watching you.  ;)

user2011's picture

Dont' worry, next month, they will make up some numbers to impress the world.

AdvancingTime's picture

 Much of the recent growth in China after 2008 came from a massive 6.6 trillion dollar stimulus program that expanded credit and poured massive amounts of money into the system. This money encouraged expansion and construction with little regard as to real demand or need. Like a plane on autopilot China continued in the direction it had been on.

Now China finds itself in a credit trap. For years the people of China have had the habit of saving much of what they earn but the low interest rates paid at banks has not rewarded savers. With few investment options much of this money has drifted towards housing and driven housing prices sky high. The economic efficiency of credit is beginning to collapse in China and the unwinding of China’s giant credit spree could be very painful. More in the article below.

http://brucewilds.blogspot.com/2014/03/china-and-great-credit-trap.html

thisisjustarandomusernameicreatedforzerohedge's picture

it's funny to see the BLOOMBERG chart referenced but not their "[PMI] rises to four-month high [signaling a stabilizing economy]" headline :P

 

anything above 47 is a fairly soft landing, my doom and gloom standards. bullish, i guess, based on the markets' reactions LOL

 

anyhow it's understandable cuz a lot of the hard data has actually bottomed out. eletricity output has stabilized, copper over-storage is correcting quickly, and railway volume is up. and this is during job cuts, real estate reforms, and before the new stimulus measures. i'm guessing next  PMI to be even higher.

 

 

orangegeek's picture

ruh-roh

 

but it's still early.  there's still time for do-overs.  so what number would you like it to be?

stant's picture

The same group that do climate change crunch these numbers. Got to multi task these days we got this here depression goin on

Quinvarius's picture

When gold is priced correctly around 5-8k, the economy will recover.  You can't temporarily tell 80% of the planet their savings worth 50% less and expect a good outcome.  the bankers seem to think that their housing derivatives can not lose 2%.  But gold is somehow not important.  It is actually funny to watch the central bakers unload into their feet.  It doesn't take a genius.  If you take away everyone's purchasing power, and ways to add purchasing power to the system, the economy stops.  Plus, you will lose all your gold trying.