First Insights: China: HSBC flash PMI drops surprisingly

Economics Research | Asia Ex-Japan
25 February 2013

First Insights: China: HSBC flash PMI drops surprisingly

The HSBC flash PMI dropped surprisingly to 50.4 in February from 52.3 in January (Consensus: 52.2; Nomura: 53.3). The new orders subcomponent fell to 50.9 from 53.1 in January and new export orders to 49.8 from 53.7. The output subcomponent fell to 50.9 from 53.1, while that for the stock of finished goods rose slightly to 49.8 from 49.6.

The fall in the index cannot be fully explained by the lunar new year effect – over the period 2005-12 there are five years in which the holiday fell in February and the HSBC PMI averaged only a 0.95 percentage point dip. The signal from the HSBC PMI is inconsistent with that from the flash MNI indicator, which jumped to 61.79 in February from 55.16 in January, and casts a doubt on how strong the growth recovery is. Signals from the official and the HSBC PMIs, as well as the MNI indicator in January and February, must be taken with caution due to the lunar new year effect, which is difficult to remove statistically due to the short sample periods and the floating dates.

We believe China’s leaders will wait for the batch of January/February macro data combined (to be released on 9 March) before making an assessment of economic conditions and deciding and appropriate policy stance.

Economists
Zhiwei Zhang