ChartBrief #14 China Official PMI

ChartBrief #14 China Official PMI
China’s official (NBS or National Bureau of Statistics) PMIs for September were more or less in line with expectations and remained in expansionary territory.  By the numbers: Official manufacturing PMI unchanged at 50.4 (Caixin/Markit manufacturing PMI was 50.1 vs 50.0 previous) and the official non-manufacturing PMI was 53.7 vs 53.5 previous.  Overall mildly positive, or stable.Play Quizzes 4

Within China’s non-manufacturing PMI the services index actually fell -0.4 to 52.3; all the strength came from property (construction index up +3.7pts to 61.9).  Within the manufacturing PMI the large (SOE) enterprises were up +0.8 to 52.6, medium-0.7 to 48.2 and small -1.3 to 46.1.  So it is a case of stimulus driving the strength; supporting the property market and large SOEs.  The small manufacturers are still doing it tough and are likely in trouble due to soft exports, spare capacity, rising labor costs, and less access to credit (vs SOEs who are given ample credit in order to boost the economy).  The other interesting statistic is that 6/11 subindexes of the PMI were above 50, the last time they were higher was in March (7/11) at the time of the stimulus rumors and iron ore price spike.  So is this a case of the stimulus rumor starting to become fact?  Best guess is yes given the strength in construction and large SOEs.

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Bottom line: China’s PMIs basically reflect earlier announced stimulus being transmitted to an economy that still faces structural challenges.


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Topdown Charts: "chart driven macro insights" Based in Queenstown, New Zealand, Topdown Charts brings you independent research and analysis on global macro themes and trends. Topdown Charts covers multiple economies, markets, and asset classes with a distinct chart-driven focus. We are not bound by technical or fundamental dogma, and instead look to leverage any relevant factor to capture the theme. As such, here you will find some posts that are purely technical strategy, some that just cover economics and data, and some posts that use multiple inputs to tell the story and identify the opportunities. Callum Thomas Head of Research Callum is the founder of Topdown Charts. He previously worked in investment strategy and asset allocation at AMP Capital in the Multi-Asset division. Callum has a passion for global macro investing and has developed strong research and analytical expertise across economies and asset classes. Callum's approach is to utilise a blend of factors to inform the macro view.
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