Friday, May 18, 2012

China Manufacturing Contracts Marginally, Slowdown Stabilizes

The HSBC China Manufacturing Purchasing Managers' Index, compiled by Markit, increased +1.0 to 49.3 in April. However, this is the 6th consecutive monthly contraction and the 9th in the past 10 months. This reading is above the 32-month low of 47.7 in November 2011, but still indicates ongoing stagnation and slight contraction.

Another PMI, by the Chinese Federation of Logistics and Purchasing, rose +0.2 to 53.3 in April, indicating manufacturing expansion. This contradicts the HSBC China PMI. What to make of this? How about averaging them. The two contrasting PMI’s averaged together are 51.3, which indicates some expansion for China manufacturing.

China Manufacturing PMI Manufacturing began contracting, an Index reading of less than 50, in July 2011. The chart peaks were 55.7 in March 2010 and 55.3 in November 2010. The short-term trend is stabilizing, while the intermediate, and long-term trends continue downwards. An index reading above 50 indicates an overall increase in manufacturing. The PMI is a percentage – not a total.


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