The official number missed expectations and Societe Generale's Wei Yao wrote "The data points seem to support our view that it is not a strong upswing. We view these data as signs that the Chinese economy is nearing the end of the early expansion phase in the cycle."
Here's her breakdown of the official manufacturing PMI report and the accompanying 11-sided polygonal chart:
"Looking at the details of the official report, it was also a mixed picture. Production eased moderately but remained well above 50. Total new orders were flat at 51.2, while new export orders slipped to 50 in December from 50.2 in November. The two inventory sub-indices – input and output inventory – continued to point to slow restocking. However, employment and imports both improved but still remained below the 50 boom-bust line. The biggest increase was recorded in the input price index, which recovered to 53.3 from 50.1 in the previous month.
The data points seem to support our view that it is not a strong upswing. However, we think there is still some upside for the PMI data, albeit less than in the previous cycle, during which this series usually went north of 55 before losing momentum. Policies, especially regarding infrastructure and housing, remain the key."
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