On Tuesday, the official PMI showed continued expansion in manufacturing. Yesterday, theHSBC/Markit China manufacturing PMI, on the other hand, remained in contractionary territory for the 6th consecutive month, with the latest reading at 49.3, slightly improving from 48.3, indicating a slower slowdown.
The chart below from Michael McDonough of Bloomberg Brief slows the continued divergence in two PMIs’ headline numbers:
The usual explanation for the divergence is that the HSBC PMI is more heavily weighted towards smaller enterprises, while the official PMI has a larger sample size and includes large companies, which are weathering the current slowdown better. Or seem to be.
There actually is a small enterprises component for the official PMI. In the latest reading, the small enterprise component of the official was 49.1, and that is much more in-line with the HSBC numbers. Not so divergent.