Friday, August 24, 2012

China LEI Rises: "Main driver was government loans"


The Conference Board: China Monthly Leading Economic Index

China Monthly LEI The current July 2012 reading is a post-recession high and an increase in the growth rate.



Andrew Polk, resident economist at The Conference Board China Center in Beijing, said "The Conference Board LEI for China increased again in July. The main driver was government loans to boost banks in financing infrastructure investment. Falling prices gave an important boost to loan growth, as the latter was measured in real terms. The small increase in the CEI, a measure of current conditions, reflects some improvement in industrial production, retail sales and electricity production, suggesting that current economic conditions are stabilizing. Although other leading indicators, such as real estate, exports and consumer sentiment, remained weak through July, the leading and current indicators point to a modest rebound in the second half of 2012."

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China Manufacturing Shrinks: "Struggling with strong global headwinds"



The HSBC China Manufacturing Flash Purchasing Managers' Index, compiled by Markit, decreased -1.5 to 47.8 in August, a 9-month low. A contraction was expected and ongoing slowdowns are projected. This is the 10th consecutive month below 50, which indicates contraction.

The reading is just above the 32-month low of 47.7 in November 2011. An index reading above 50 indicates an overall increase in manufacturing. The China Manufacturing PMI has been just below 50 for 13 of the past 14 months.

China Manufacturing PMI Manufacturing began contracting, an Index reading of less than 50, in July 2011. The chart peak was 55.3 in November 2010. The short, intermediate, and long-term trends are now decreasing. The PMI is a percentage - not a total.



Hongbin Qu, Chief Economist, China & Co-Head of Asian Economic Research at HSBC, said: "Falling orders dragged down the August flash PMI to a nine-month low, suggesting Chinese producers are still struggling with strong global headwinds. To achieve the stated policy goal of stabilizing growth and the jobs market, Beijing must step up policy easing to lift infrastructure investment in the coming months".



The HSBC Flash China Manufacturing Purchasing Managers’ Index™ (PMI™) is published on a monthly basis approximately one week before final PMI data are released, making the HSBC PMI the earliest available indicator of manufacturing sector operating conditions in China. The estimate is typically based on approximately 85%–90% of total PMI survey responses each month and is designed to provide an accurate indication of the final PMI data.

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Wednesday, August 8, 2012

China Manufacturing Contracts: "External markets continuing to deteriorate"



The HSBC China Manufacturing Purchasing Managers' Index, compiled by Markit, indicated ongoing manufacturing contraction in July. The PMI did increase +1.1 to 49.3, a 5-month high, which indicates a slowing of the contraction.

The reading is above the 32-month low of 47.7 in November 2011. An index reading above 50 indicates an overall increase in manufacturing. The China Manufacturing PMI has been below 50 for 9 consecutive months and for 12 of the past 13 months.

Another PMI, by the Chinese Federation of Logistics and Purchasing, dipped -0.1 to 50.1 in July, indicating near stagnation. This contradicts the HSBC China PMI. What to make of this? How about averaging them. The two contrasting PMI’s averaged together are 49.7, which indicates a slight contraction for China manufacturing. There has been some recent questioning of the CFLP PMI being overstated.

China Manufacturing PMI Manufacturing began contracting, an Index reading of less than 50, in July 2011. The chart peak was 55.3 in November 2010. The short, intermediate, and long-term trends are now level. The PMI is a percentage - not a total.



Hongbin Qu, Chief Economist, China & Co-Head of Asian Economic Research at HSBC, said: "Final manufacturing PMI confirmed only a modest improvement of manufacturing conditions thanks to the initial effect of the earlier easing measures. But this is far from inspiring, as China’s growth slowdown has not been reversed meaningfully and downside pressures persist with external markets continuing to deteriorate. We still expect Beijing to step up policy easing in the coming months to support growth and employment".



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