Despite this weekend's exuberance over an oddly exuberant "20th month of expansion" official China PMI [4](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...
[5]
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.
[6]
and missed expectations for the 7th month in a row...
[7]
"...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