International | Feb 01 2011
By Greg Peel
Last night it was revealed in the US that the Chicago area purchasing managers' index (PMI) jumped to 68.8 in December which, given a result of 50 means a neutral rate of growth, is an astonishing result – indeed it was the highest recorded in the 20 years of measurement. Anything above 60 is seen as rapid expansion.
This is the US economy we're talking about. The same economy that only six or so months ago was supposedly on the verge of a “double dip”. It just goes to show what a bit of monetary policy tinkering can do which, in the US case, came in the form of QE2. The result bodes well for tonight's release of the nationwide US manufacturing PMI.
Today China released its equivalent manufacturing sector PMI which, on the official release, showed a second consecutive easing in growth rate to 52.9 in January from 53.9 in December. It was not a shock result given the Christmas Day interest rate rise from Beijing. A reading of 52.9 suggests China's manufacturing sector is just ticking along nicely on moderate growth – neither threatening a hard landing nor looking like a runaway locomotive.
It would seem Beijing's policy measures are working as planned, just as they pretty much did all through 2010 (if we take the “official” numbers as gospel, which we know is folly). It is still likely, nevertheless, that 2011 will see a continuation of the “good news is bad news” and vice versa attitude to Chinese data given any solid results will encourage further tightening from Beijing, and any weak result would suggest the screwdriver will be rested.
That aforementioned “folly” comes to the fore when one notes the independent calculation of China's manufacturing PMI conducted by HSBC. That survey saw the equivalent HSBC index rise to 54.5 in January from 54.4 in December – a slight gain and a higher absolute result.
HSBC notes a solid rise in new orders in January, albeit below November's peak, which is a forward-looking indicator for GDP.
Australia's manufacturing PMI was also released this morning. While the local sector is relatively much less influential within the local economy than that of China or the US given the weight of our now somewhat soggy resources sector, a reading of 46.7 for January provides little encouragement. That's 0.4 better than December, but still below 50 meaning ongoing contraction for several months now with a strong currency and weak local demand to blame. Our services and construction sectors have fared little better.
