China’s official manufacturing purchasing managers index, which is published by China’s National Bureau of Statistics, came in at a respectable 50.6 in December. This was flat from November.
Any number above 50 signals expansion.
However, economists were expecting the number to climb to 51.0.
So, while the margin of error was slim, it was nevertheless a disappointing report.
“The data points seem to support our view that it is not a strong upswing,” said SocGen’s Wei Yao in a note to clients this morning. “We view these data as signs that the Chinese economy is nearing the end of the early expansion phase in the cycle.”
But Bank of America Merrill Lynch economist Ting Lu isn’t as worried about the health of the Chinese economy. From Lu’s note:
First, most data points, especially the industrial earnings, have been pointing to an impressive recovery. Second, the private HSBC PMI for Dec, which was released yesterday, jumped to 51.5 in Dec from 50.5 in Nov, helping trigger a rally of China’ stock prices yesterday. Third, PMI data are heavily seasonally adjusted, especially during the year ends and beginnings. It’s likely that the NBS statisticians intentionally reported a conservative estimate within the allowable range to save better data for rainy days. Finally, the relatively muted official NBS PMI, especially a decline of exporter orders to 50 in Dec from 50.2 in Nov, means that the Chinese government will continue its pro-growth policy stance at the moment to withstand weak external demand.
Lu’s take on the number being massaged is interesting because most sceptics of Chinese data believe that the numbers get skewed upwards when they are skewed.
Here’s a break down of the official PMI number via Fung Group:
Photo: Fung Group