April 2nd, 2012
Econintersect: While headlines scream the Chinese Purchasing Manager's Index (China PMI) is falling off a cliff, most readers are unaware there are two Chinese PMI's -
- HSBC China Manufacturing PMI ( HSBC PMI)
- Official manufacturing PMI released by China’s National Bureau of Statistics (NBS PMI)
Worse, drilling into the detail - there are different takeaways.
An analysis of the differences has been provided by Danske Research:
In our view, the Chinese economy hit the bottom in November in 2011 and has since been recovering moderately. This is consistent with the development of seasonally adjusted NBS PMI (excluding 2008 from the calculation of seasonal factors), but to some degree also consistent with the HSBC PMI, where new orders remain above the 45 low reached in November last year. Our hard data also suggest that domestic steel production bottomed out in November and after a sharp decline in Q4 steel prices have stabilised in Q1 with no signs of renewed weakness as indicated by the weak HSBC manufacturing PMI.
The NBS manufacturing PMI for March is very encouraging, albeit that on the surface it exaggerates the strength of the Chinese economy. First, it suggests that we are far from a hard landing scenario for China. Second, the NBS PMI also suggests that the Chinese economy is recovering moderately. That said, there will be some headwinds for two manufacturing PMIs in the coming months as seasonality should push NBS slightly down and the seasonality distortions should continue to weigh on HSBC PMI in April.
A simple comparison of the two PMI's:
Another view is offered by CNBC this morning:
You be the judge - is the Chinese PMI bad getting worse, or weakly growing gaining strength?
source: Danske Research