China released its official January PMI over the weekend and the news was more slowing with the headline sliding three points into contraction at 49.8, new orders were down 2 points and barely expanded at 50.2 and new export orders dropped 7 points t0 48.4. Here’s the chart:
As you can see, the same time last year exhibited a similar sliding trajectory though we’re already lower than then. In 2013 the index was turned up by a renewed infrastructure push. We’ve already seen that in the past few months so the index may hold up from here.
However, last year did not include the structural shakeout that is now transpiring in real estate. Sales have rebounded in narrow parts of the sector but construction is likely to continue to slow as oversupply weighs on the overall market. The big PMI dips in mid 2012 were the last time we saw a real estate stall like the one we’re seeing now, although on that occasion it was cyclical.