Wednesday, March 2, 2011

China Manufacturing Index Plunges (Chart) February: "Output rises modestly"

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HSBC China Manufacturing PMI

China Manufacturing Index Plunges

China Manufacturing The HSBC China Manufacturing PMI, compiled by Markit, plunged in February to 51.7 from 54.5 (-2.8) in January. Key points noted in the report were:
* PMI falls to seven-month low of 51.7, up slightly from the earlier flash estimate of 51.5. 
* New order growth eases to slowest since last August.* Purchase price inflation hits three-month high. Commenting on the China Manufacturing PMI survey, Hongbin Qu, Chief Economist, China & Co-Head of Asian Economic Research at HSBC said:
"The Final PMI reading confirms that the growth of China’s manufacturing sector is cooling a little, despite the small upward revision from the flash reading attributed to slightly better new orders. This is a positive development as slower growth is helpful to check inflation, while concerns about a slump in growth are unwarranted."

China Manufacturing PMI (Chart) Below is a chart of the China Manufacturing PMI for the latest 12 months, from March 2010 through February 2011. Manufacturing has expanded, remained above 50, every month except July 2010 and for 7 consecutive months. The PMI is a percentage - not a total. More about the PMI below the chart. A reading above 50 indicates Chinese manufacturing is expanding even when the monthly PMI is decreasing, just at a slower rage.

Commentary The monthly decrease in the China Manufacturing PMI of -2.8 is one of the largest monthly decreases since the PMI was begun in April 2004. However, Hongbin Qu, Chief Economist, China & Co-Head of Asian Economic Research at HSBC, did say that, "concerns about a slump in growth are unwarranted". China has implemented fiscal and monetary measures to slow down the economy to contain prices and the February PMI drop appears to be the result to some extent. What portion may be of a slowing of both the Chinese and Global economic expansion is the concern.

About the PMI The HSBC China Report on Manufacturing is based on data compiled from monthly replies to questionnaires sent to purchasing executives in over 400 manufacturing companies. The panel is stratified geographically and by Standard Industrial Classification (SIC) group, based on regional and industry contribution to Chinese Industrial Production. Survey responses reflect the change, if any, in the current month compared to the previous month based on data collected mid-month. For each of the indicators the ‘Report’ shows the percentage reporting each response, the net difference between the number of higher/better responses and lower/worse responses, and the ‘diffusion’ index. This index is the sum of the positive responses plus a half of those responding ‘the same’.
The Purchasing Managers’ Index™ (PMI™) is a composite index based on five of the individual indexes with the following weights: New Orders - 0.3, Output - 0.25, Employment - 0.2, Suppliers’ Delivery Times - 0.15, Stock of Items Purchased - 0.1, with the Delivery Times index inverted so that it moves in a comparable direction.
Diffusion indexes have the properties of leading indicators and are convenient summary measures showing the prevailing direction of change. An index reading above 50 indicates an overall increase in that variable, below 50 an overall decrease.

About HSBC Headquartered in London, HSBC is one of the largest banking and financial services organisations in the world. Its international network comprises some 8,000 offices in 87 countries and territories in Europe; Hong Kong; Rest of Asia-Pacific; the Middle East; North America and Latin America. With assets of US$2,418 billion at 30 June 2010, HSBC is one of the world’s largest banking and financial services organisations. HSBC is marketed worldwide as ‘the world’s local bank’.

About Markit Markit is a leading, global financial information services company with over 1,900 employees. The company provides independent data, valuations and trade processing across all asset classes in order to enhance transparency, reduce risk and improve operational efficiency. Its client base includes the most significant institutional participants in the financial market place. For more information please see

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