Maybe “desperate” isn’t the right word.
But if “desperate” is too harsh, it’s certainly fair to say that China could really use some good news on the economic front coming off a series of dour data points that together suggest the engine of global growth and credit creation continues to sputter in the face of trade tensions, slumping external demand and lackluster domestic sentiment.
Mercifully, Saturday brought some hope. The official manufacturing PMI for November printed 50.2, better than the 49.5 consensus was expecting and more importantly, back in expansion territory for the first time since April.
Meanwhile, the non-manufacturing PMI handily beat estimates, coming in at a solid 54.4, the best print in eight months.
That’s good news, considering October’s 52.8 read on the non-manufacturing gauge was a big miss, and appeared to validate fears that the factory slump was spilling over.
Earlier this week, the NBS said industrial company profits plunged 9.9% on year last month, the steepest slide on record as PPI deflation and depressed domestic demand ate into bottom lines. Profits fell 5.3% in September.
In addition, industrial output, retail sales and fixed investment all disappointed in October, as did credit growth. The PBoC delivered a series of token rate cuts this month as part of an ongoing effort to administer a slow drip of monetary accommodation aimed at keeping things some semblance of stable as the trade talks move forward at a snail’s pace.
Growth is seen slipping below 6% by some economists and Chinese assets have underperformed their US counterparts of late. The S&P has easily outstripped the SHCOMP in 2019, despite the latter’s blistering start to the year.
Whether the upbeat PMI data is a head fake remains to be seen, but the market will nevertheless be pleased with the numbers.
The rebound in the November NBS PMI goes some ways towards closing the yawning gap that developed last month between the official gauge and the Caixin survey.