After hours last night, when all but the most dedicated of market savants (or late stumblers home from a night out checking the Bloomberg one more time) are sleeping, China released its Non-manufacturing PMI data and it was a howler. The series is very cyclical but we note that the November print fell dramatically to its lowest level since the middle of 2008's global economic meltdown. Dropping below the 50 (deteriorating) line for the first time since Feb2011 and combined with the dismal manufacturing PMI print from earlier in the week, we are reminded of David Rosenberg's critical insight 'Don't confuse resilience with lags' when we hear further chatter about the US apparent miracle decoupling. It seems that this 'lag' is already impacting US firms, as we noted earlier, and with EM nations increasingly starved of credit via European bank deleveraging, it seems a game-of-chicken between the Fed and the PBOC may begin on who prints/QEs first to save the world from reality once again.
China non-manufacturing PMI is evidently extremely cyclical (the orange curves) but we note the huge drop off in the November print relative to previous years. Not only is the first November print below 50 in 3 years its only been worse than this level during the crisis meltdown of the global economy.
And from David Rosenberg's Friday Breakfast with Dave, OASIS OF PROSPERITY:
On September 4, 1998, Alan Greenspan famously said, "It is just not credible that the United States can remain an oasis of prosperity unaffected by a world that is experiencing greatly increased stress".
Everybody talks about decoupling again, this time in reverse. The US economy will somehow not feel the effects of a European recession, even though GDP growth in America is 86% correlated with the pace of activity in the continent.
Don't confuse resilience with lags.
Be that as it may, it is interesting to see practically every country in the world with manufacturing diffusion indices below 50 and the US above 50.