Photo: screengrab from Kill Bill Vol. 2
The two most important economic indicators of the night were China’s two manufacturing PMI numbers.China is the second largest economy in the world, and it is also the most important growth engine for the global economy.
Unfortunately, the numbers appeared to be conflicting.
First up was China’s official PMI number, which unexpectedly fell to 50.1, an 8-month low.
This was followed by China’s unofficial HSBC PMI number, which climbed to 49.3.
It’s worth noting that a number below 50 signals contraction in the industry. So, while the numbers were close, but they tell very different stories.
The official number is more exposed to large businesses, whereas the HSBC number is more exposed to small and medium-sized enterprises (SMEs).
The SMEs have two key disadvantages: 1) they are smaller, which means they have a more difficult time accessing capital in China’s slowing economy and 2) they include more exporting businesses, which means they are more exposed to the rest of the world, which is arguably in worse shape than China.
So it seems to make sense that the HSBC number would be less than the official number.
It’s difficult to confirm whether this is actually going on.
One trick that savvy economists use is to look at the economic data of China’s major trading partners.
One of the most obvious partners is Australia, which earlier tonight reported that its manufacturing PMI number sank to 6.9 points to 40.3 in July.
It’s also worth noting that trading partners Japan, South Korea, Taiwan, and Vietnam all reported that their PMI numbers deteriorated to levels below 50.
So, regardless of whether or not China is scrubbing its data, th bottom line seems to be that the global economy is slowing.