A bit of a mixed bag here in the China PMI report. While manufacturing continues to expand we are also seeing record moves in inflation. China’s headline PMI came in at 55.3 from 54.8 last month. Hongbin Qu, Chief Economist, China Economic Research at HSBC says the report is mixed and will likely result in increased concerns about “quantitative tightening”:
“The stronger reading of the November Manufacturing PMI, especially the faster rise in input prices, against the backdrop of the Fed’s QE2, is likely to translate into concern about inflation. We expect Beijing to step up its efforts of quantitative tightening and to hike interest rates by 25bp in the coming months to check inflation.”
Key points
• Strongest rise in overall new orders since March.
• Supply chain bottlenecks widespread in November.
• Input price inflation the fastest since July 2008; output charges raised at rapid rate.
Source: HSBC
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.
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