At this point these soft-survery-based PMIs are becoming a running joke. Japanese macro surprise data has done nothing (and we mean nothing) but disappoint recently and currently stands at 3-month lows. So it makes perfect sense that July Japan Services PMI would print its first expansion since March. On the other hand, after exploding to 18-month highs in June, China Services PMI collapsed to a 2005 record low. As BofA warned previously [7], it is important to understand how crude these surveys are - these data get way too much air time. They give a timely, rough read on the economy, but should get little weight once hard data are released.
So with great pleasure we illustrate - The Japan farce... (what happens next!!!)
[8]
And China's total collapse...
[9]
As Markit so desperately explains:
The headline HSBC China Services PMI came in at 50.0 in July, the lowest reading since the series began in November 2005. Both the new business and outstanding business indices declined from their levels in June. The weakness in the headline number likely reflects the impact of the ongoing property slowdown in many cities as property related activity, such as agencies and residential services, see less business. Meanwhile, the employment and business sentiment indices remain stable. In the coming months, we think the service sector may get some support from the recovery in investment. But today's data points to the need of continued policy support to offset the drag from the property correction and consolidate the economic recovery.”
* * *
Here's China's Q1 record surge in credit creation that after sending Q2 economic indicators skyward [10]...
[11]
Has failed to generate any Q3 follow through. Indeed, it appears the Chinese credit impulse, so strong after Q1 when as can be seen on the chart above Chinese banks added a record amount of assets in history, has fizzled out and as the following visualization of the impact of massive credit impulse surges [12]on growth shows, China may be about to suffer a major Q3 hangover.
[13]
Maybe - just like BofA suggested - it is time to focus on the hard data instead... HERE [14] and HERE [15]
