Thursday, December 2, 2010

US & China PMI Review

Both China and the US released their November PMI stats in the past few days, showing relatively strong vitals in both of their manufacturing sectors. Looking first at China, the official PMI rose to 55.2 from 54.7 in October; beyond expectations for 54.8. The HSBC Markit index rose to an 8 month high of 55.3 from 54.8 in October. The standouts in the sub-indices were Production (58.5 vs 57.1), Supplier Delivery (48.9 vs 49.3), New Orders was basically flat, but still strong (58.3 vs 58.2), similarly Employees was little changed (52.0 vs 52.1).

So overall a relatively strong result from China, new orders are still going strong, production activity is picking up, which is all a positive sign given the moves the authorities have taken to tackle inflation and perhaps engineer some sort of soft landing. It's a good sign, because it shows there is still solid fundamental strength in the Chinese economy, i.e. that it can withstand a bit of a slowing.

Meanwhile in the US, the ISM PMI reduced slightly to 56.6 from 56.9, and slightly below consensus 57. But again, the figure is comfortably above the 50 point mark, indicating relatively robust expansion. Looking at the detail however, much of the changes were particularly impressive, production fell off quite a bit, new orders fell, exports fell, and employment was basically flat. So we're in the right space for now, but if this sort of pattern repeats, it will be back to square one for the manufacturing sector.

So the takeaway is that the current state of the US and Chinese manufacturing sectors is relatively positive. China probably more so, and the direction is also probably more promising, and it lines up with the view that China's economy still has a decent amount of wind left in it. The US meanwhile is showing strength, but the wobbles are also showing through - there will be strength but as noted before, the US is in the muddle ages of the recovery, so it's almost certain to be a nonlinear progression.

Econ Grapher Analytics
Yahoo Finance
Institute for Supply Management

Article Source:

No comments:

Post a Comment

What do you think?