China Beige Book, HSBC Manufacturing PMI Paint Diametrically Opposing Pictures Of China's Economy

Tyler Durden's picture

S&P 500 futures are jumping exuberantly as Japan and China PMIs print above expectations and back in expansion territory (Japan best in 3 months, China best in 7 months). This is China's best 2-month PMI rise since Oct 2010 (which makes perfect sense amid the collapsing housing market and CCFD ponzi probe) - which provides the perfect propaganda meme that targeted RRR cuts workl. However, while stocks don;t care to scratch the surface, there are 2 glaring similarities that could become a problem. Both China and Japan saw employment drop (Japan's first in 11 months) and furthermore both China and Japan saw input prices rise and output prices decline - not exactly the margin expansion dream everyone is hoping for... and all this as China's Beige Book shows the slowdown deepening on weak investment.

 

China's Manufacturing PMI saw its best 2 months since Oct 2010... so RRRs work right?

 

Which is odd given that GDP expectations continue to collapse... (h/t @M_McDonough )

 

And China and Japan both see employment drop and margin pressures build...

 

as Japan employment tumbles...

 

But none of that "fact" details matter - you buy stocks...

 

As China's Beige Book was anything but positive...

  • CHINA BEIGE BOOK SAYS SLOWDOWN DEEPENING ON WEAK INVESTMENT
  • CHINA BEIGE BOOK SAYS FEWER COMPANIES ACCESSED CREDIT IN 2Q

China’s economy continues to decelerate quarter-on-quarter, driven by “perhaps unprecedented weakness” in capital expenditure, China Beige Book says in its 2Q survey released today.

* Fewest number of firms increasing investment and most pronounced quarter-on-quarter drop in 10 quarters of surveys
* Fewer companies surveyed accessed credit from banks, shadow lenders and the bond market
* Survey finds loan rates inverted, with bank interest rates ticking up in the quarter while non-bank rates saw a “substantial slide” to below levels offered by banks
* Firms appear to be responding to current economic conditions by borrowing and spending less
* Weakness in investment has “sweeping effects” on sectors, regions and gauges of company performance
* Services weakened more sharply while transportation, mining, and retail slowed
* Manufacturing showed year-on-year growth for the fourth quarter in a row and was stable vs previous quarter
* In property sector, residential and commercial realtors “were pummeled,” while builders reported higher starts and rising prices, with stable or larger proportions reporting revenue growth
* Investment slowdown depressed growth in hiring, wages, laboractivism
* Worst-performing sector was minerals as coal producers sawrevenue contraction

 

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So who is making stuff up? Markit (who just IPO'd) or the Chinese government - a 7 month high from Markit's survey? or the worst QoQ drop in 30 months from the Beige Book.