China: Surprisingly strong manufacturing data – ING

Robert Carnell, chief economist at ING, points out that China’s Caixin manufacturing PMI for September rose from 50.4 to 51.4, a surprisingly strong reading.

“Indeed, on a trend basis, the Caixin index has been on an erratic uptrend since its trough in January this year, when it dropped to 48.3. It now suggests that the more export focussed private sector firms that constitute the bulk of this survey are actually seeing activity increase. Even the export orders index, which remains in negative territory, seems to indicate that things are not falling as fast as they were. It is less clear that the Caixin services indicator, which is released today, will be similarly affected by such stimulus. Consensus sees the index virtually flat at 52.0 (52.1 in August). That seems a reasonable guess. Though this survey is far more erratic and almost anything seems possible. If I had to guess, I would say that this survey should converge on its manufacturing counterpart, though the correlation between the two seems virtually nonexistent (0.09 since the beginning of 2017). A modest uptick today would not seem totally outlandish. But the scope for two-way surprise is high.