Baidu Planet: October 2011

● Baidu Planet ●

HSBC China Manufacturing PMI

China Manufacturing PMI The HSBC China Manufacturing Purchasing Manangers' Index, compiled by Markit, was up +1.1 in October to 51.0. This is a 5-month high and the first expansion since June. An index reading above 50 indicates an overall increase in manufacturing. The key points of the report are:
● Output growth supported by renewed expansion of overall new orders
● Growth of new export business the highest since January
● Input cost inflation eases; charges rise at faster pace

Commenting on the China Manufacturing PMI Commenting on the survey, Hongbin Qu, Chief Economist, China & Co Head of Asian Economic Research at HSBC said: “The final PMI confirms the notable improvement in China’s manufacturing activities driven by rising new business from both domestic and external markets. Despite the slight uptick in output prices growth, inflation is on track for easing. This provides leeway for Beijing to fine-tune policy to strike a better balance between growth and inflation priorities. We expect stable monetary policy with targeted easing in the coming months.”

Trend The PMI has increased 3 consecutive months. The short-term trend has reversed to upwards. The intermediate-term and long-term trends continue downwards. The trend of the series average, from March 2010, continues downwards.

Cycle History Since the beginning of the series in March 2010, the peak has been in March 2010 at 55.7. The recent peak was 54.5 in January 2011. The low has been 49.3 in July 2011.

China Manufacturing PMI (Chart) Below is a chart of the China Manufacturing PMI since the beginning of the series in April 2010 through the latest month reported. Manufacturing began contracting, below an Index reading of 50, in July 2011 and this contraction continued through September 2011. The PMI is a percentage - not a total. More about the PMI below the chart. A reading above 50 indicates Chinese manufacturing is expanding.

Commentary The China Manufacturing PMI at 51.0 (+1.1) indicates a rebound to expansion, after 3 consecutive months of contraction. A reading above 50 indicates expansion. The HSBC report noted, with this expansion, "The rate of new order growth was solid, and the fastest since May". China has implemented fiscal and monetary measures to slow down the economy to contain prices, which seem to be effective. Another PMI, by the Chinese Federation of Logistics and Purchasing, was 50.4 for October 2011.

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 www.markit.com