The China Flash PMI for May is out and distinctly reversed course to post 49.7 up from 48.1 in April and after several fading months. Consensus was 48.4:
The HSBC Flash China Manufacturing Purchasing Managers’ Index™ (PMI™) is published on a monthly basis ahead of final PMI data, making the HSBC PMIthe earliest available indicator of manufacturing sector operating conditions in China. The estimate is typically based on approximately 85%–90% of total PMI surveyresponses each month and is designed to provide an accurate indication of the final PMI data. May final PMI data will be released on 3 June 2014.
The internals are firming for both domestic and external demand:
HSBC reckons:
“The HSBC Flash China Manufacturing PMI rebounded sharply to 49.7 in May, up from 48.1 in April. The improvement was broad-based with both new orders and new export orders back in expansionary territory. Disinflationary pressures also eased over the month and output prices increased for the first time since November2013. However, the employment index fell further to 47.3, which implies that this month’s uptick in sentiment has not yet filtered through to the labour market. Some tentative signs of stabilization are emerging, partly as a result of the recent mini-stimulus measures and lower borrowing costs. But downside risks to growth remain, particularly as the property market continues to cool. We think more policy easing is needed to put a floor under growth in the coming months.”
We shall see. Looks like the economy is taking the housing slowdown in its stride for now as a little stimulus and stronger exports (highest since 2010) are at work, but it was always the second half that was the risk from property. It has put a bid under the dollar (up 40 pips), iron ore futures (up 10 points) and rebar futures (up 22 points). We may have seen the worst of iron ore price falls for now.
