China’s Leading Indicators Continue to Improve

With the recent improvement in China’s PMI and now leading indicators, the worries over the Chinese economy might be a bit exacerbated (via Nomura):

·     Our China leading index picked up further in October, with five of the nine components improving (Bloomberg ticker: NMEICLI).

·     On a 3-month moving average basis, 58% of the indicators in our heatmap, which tracks 31 indicators, were positive in October, up from a revised 49% in September.

·     These results provide further support to our out-of-consensus view of GDP growth rebounding to 8.4% in Q4 2012.

Nomura’s China leading index (CLI) improved for the second consecutive month in October, after a continuous decline from April to August (Figure 1). Five of the nine components registered positive growth in October, led by production of chemical fiber and metal-cutting machines.

Source: Nomura Securities

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Cullen Roche

Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering research, private advisory, institutional consulting and educational services.

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  • http://www.chpc.biz Brian_Ripley

    Quote from Michael Pettis: “…China’s GDP is significantly overstated, but today, with nearly everyone recognizing the extent of Chinese overinvestment, the extent of environmental degradation (one professor at Renmin University estimates that because of the failure to recognize environmental degradation China’s GDP is overstated by 10-20%), and the large but unrecognized amount of NPLs (non performing loans) in the banking system, it is hard to believe that anyone still doubts that China’s real GDP might not be quite as high as claimed.” SOURCE: http://www.mpettis.com/2012/11/17/is-there-an-asian-rmb-bloc/

  • Andrew P

    It has been clear for a long time that a centrally managed, pseudo-capitalist economy like China is limited only be available manpower and resources. Non Performing Loans don’t matter as they just get covered by the money printer. China is still not running out of either manpower or resources.

  • Alberto

    I tried hard to understand China and I’m still trying. I read a lot, met people living there, I was there 3 times but I still don’t understand enough to put money on the long side or the short side. Still one of the great mistery of our age and therefore not a place to put my money.