China update: manufacturing improving!

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The HSBC Flash China Manufacturing PMI was released this morning. This measure differs significantly from the official CFLP manufacturing PMI, but it does give some insight into what to expect from the CFLP PMI for August (to be published on 1 September). Although still contracting fractionally according to HSBC, the manufacturing PMI and manufacturing output index are both at two-month highs. Other important points gleaned from HSBC’s report are the following:

  • The new exports index rose to a three-month high and is contracting at a slower rate.
  • Stocks of finished goods are contracting at a faster rate.
  • Suppliers’ delivery times are lengthening at a faster rate.
  • Backlogs of work are expanding at a faster rate.

The above report underscores my thoughts that the seasonal strength in August is again under way.

Sources: CFLP; Li & Fung; Plexus Asset Management.

A strong rebound in manufacturing activity can therefore be expected in September.

Sources: CFLP; Li & Fung; Plexus Asset Management.

On a seasonally adjusted basis China’s manufacturing sector has recovered significantly from the Japanese disaster-induced slump. China’s CFLP manufacturing PMI for August is therefore virtually entirely dependent on the extent of the recovery in Japan’s manufacturing sector.

Sources: CFLP; Li & Fung; Plexus Asset Management.

Sources: CFLP; Li & Fung; Markit; Plexus Asset Management.

The non-manufacturing sector in 2011 has so far remained at 2010’s elevated levels.

Sources: CFLP; Li & Fung; Plexus Asset Management.

The trend in the non-manufacturing sector’s PMI is also on par with the seasonal trend, indicating further strength in the PMI through October this year.

Sources: CFLP; Li & Fung; Plexus Asset Management.

Consumer confidence continues to underscore the seasonally adjusted non-manufacturing PMI and I see no threat of a reversal of fortune in the near future.

Sources: CFLP; Li & Fung; NBS of China; Plexus Asset Management.

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