China: Preliminary Manufacturing PMI Softens

Econintersect:  The consensus was that there would be a slight strengthening of the manufacturing PMI (Purchasing Managers’ Index)in China for December.  The preliminary reading (HSBC Flash China Manufacturing PMI™) came in at 50.5, down from 50.8 in November.

This report covers a shorter period than usual (only one week) because of the holiday season.  The final report for December will not be released for another 2 1/2 weeks (January 2).  These circumstances raise the concern of larger than usual sampling error for comparison to the final report when it eventually comes out.  Usually the Flash report is within 0.1 or 0.2 of the final reading.  The circumstances this month may cause that relationship to be weakened.

Only a few comments have been reported as this is written.

CNBC reported that Alaistair Chan, economist at Moody’s Analytics was optimistic:

“I think they are in a fairly sweet spot. I don’t see much pressure coming from the demand side so I think firms will be quite happy heading into the holiday season.”

But (also from CNBC) Zhiwei Zhang, chief China economist at Nomura said:

“We believe this trend [weakening] will continue in first half of 2014, as market interest rates keep rising and pushing up financing costs for corporates.”

Hongbin Qu, Chief Economist, China & Co-Head of Asian Economic Research at HSBC said:

“The December HSBC Flash China Manufacturing PMI reading slowed marginally from November’s final reading. But it still stands above the average reading for 3Q, implying that the recovering trend of the manufacturing sector starting from July still holds up. As a result, we expect China’s GDP growth to stabilise at around 7.8% yoy in 4Q.”

CNBC reports that Asian stocks moved lower, mostly fractionally after the news was announced, except for Shanghai (-1.2%) and Tokyo (-1.6%) with much bigger sell-offs.

John Lounsbury

Sources:

• HSBC Purchasing Managers’ Index™ (Press Release, Markit, 16 December 2013)

• China flash PMI slips – What are we missing? (CNBC, 15 December 2013)

• Nikkei, Shanghai lead Asia stocks lower; China PMI, Fed anxiety weigh (Nyshka Chandran, CNBC, 16 December 2013)