China data confirms muted bounce

Over the weekend, China’s National Bureau of Statistics’ released its own leading indicator, which rose in October, the fourth consecutive month of increase, albeit at a much slower pace.

October’s leading index rose to 100.42. However, the September number has been revised downward from 100.49 to 100.36. The increase of the index for October is much slower than September, suggesting a good probability of a continued pick-up in economic activities in the final quarter of 2012, although momentum has slowed:

Confirming the modest bounce, the official PMI for November was also released, hitting a 7-month high in November.

Headline manufacturing PMI rose to 50.6, a 7-month high, slightly lower than the consensus estimate of 50.8. New orders rose from 50.4 to 51.2, and finished goods inventory rose from 48.4 to 48.8, thus new orders less inventory measure rose slightly from 2.3 to 2.4. New export orders climbed above 50 to 50.2 for the first time since May.

Meanwhile, the employment index fell to 48.7, the lowest level since January this year, while input price fell from 54.3 to 50.1.

Despite improvements, the headline number as well as new export orders remain weak relative to the same times of previous years, with the exception of 2008 and last year. Notable weakness in employment is also apparent.

Despite improvement in the headline numbers and most sub-indices, the “recovery” of the economy does not appear to be strong, especially considering that this time of the year is usually the strongest months for manufacturing.

Comments

  1. Factory orders are way down from what I can get from a few factory owners over there. One of the big problems one owner was telling me is wage rises. He said wages are going up but they can’t get more money for their products.

    Also, these PMI numbers are extremely poor for China considering China is busy manufacturing for the Christmas rush on a global scale and the up and coming Chinese new year.

    I feel China is in bad shape, and I believe that large scale lay off’s will start to mount in 2013/14 and as that happens the NPL will sky rocket as business and people who investment in property can no longer pay their loans. At a possible 65 Million empty apartments China is the biggest bubble crash waiting and it’s impact on Australia will be huge.

  2. It will be fascinating to watch how the new leadership handles the economic landscape in China. With manufacturing weak, the heavy lifting will have to be done by services if the Politburo wishes to press ahead with the necessary rebalancing. Will the new leaders succumb to temptation a powerful interest groups and delay the reforms in favour of FAI-led growth in the year ahead?