There are major problems with PMI’s as anything like a useful indicator of anything actually useful. However, what has taken place recently particularly with regard to the Chinese version is outright silly, obtuse or intentionally misleading. Only one week ago, the HSBC and Markit “flash” PMI for China manufacturing rose from 50.2 to 50.5. The headline of the Bloomberg article I quoted then was all you needed to know about spin and misdirection, Manufacturing Rebound Relieves Growth Concerns in China.

Of course, actual growth in China did no such thing, as all that happened was this PMI came in at the high end of economists’ estimates. Or did it?

The final HSBC/Markit Manufacturing Purchasing Managers’ Index(PMI) hovered at 50.2 in September, unchanged from the August reading which was a three-month low, but lower than a preliminary reading of 50.5.

There was more than a little hubbub about the increasing PMI, especially incongruous with the context of commodity prices and actual industrial production figures.  The disparity of downplaying August industrial production, which were the worst since December 2008, for September’s “rising” PMI was what stood out – and really should not.  So we should expect a full retraction about how manufacturing “rebounded” in September?

China’s vast factory sector showed signs of steadying in September as export orders climbed, a private survey showed on Tuesday, easing fears of a hard landing but pointing to a still-sluggish economy facing considerable risks.

Lowered expectations but still spun positive. All this for a China PMI that never forecast such a huge slowing in actual industrial production originally, nor a pretty severe curtailing in property sales and investment, also coinciding with a pretty large selloff in commodity prices (tight “dollar” environment notwithstanding). Embedded further within the same article:

The latest worrying data came at the weekend, with news that profits at China’s industrial companies fell in August from a year earlier. Many of the country’s biggest firms are already receiving heavy subsidies from the state.

I suppose it’s too much to expect the “other” PMI to be given its rightful place as a third or fourth tier indicator (or actually irrelevant) when it comes out on Wednesday. That is clearly the case for asset “markets” which are all too efficient to care about context, rather extending themselves over 50.5 vs. 50.2; though curiously never having unwound the disappearance of the 50.5. “Markets” that need such wafer thin reassurance is another signal for rationalizing.


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