China’s Purchasing Managers Index slipped in April to 50.6, down slightly from 50.9 in March. Some headlines purported that this is important in that it signaled weaker manufacturing in China. Reality check – this is just noise and it would be a mistake to draw major conclusions from a one-month reading of any leading indicator.
A preferred means of analysis of China Industrial Production is observing that the rates-of-change show that China has been slowing in its rate of rise over the last few months and that the diminished rate of growth in the Chinese economy is going to extend through the near term. The input from the rates-of-change is mathematically viable and dependable, while a one-month reading of a leading indicator is not. Readers of the ITR Trends Report were months ahead of today’s headline.
China has begun to slow loan activity, but lending remains 15.1% higher than this time last year. Reining in the pace at which borrowed money enters the economy will help the housing bubble problem, but it will also slow down the economy.
Normally China would export their way out of any internal difficulties. That will be harder to do this time around given the problems in Europe and below year-ago levels of activity in Brazil, two of China’s largest markets. China’s exports to their largest market, the US, are 7.2% higher than last year, but there is a noticeable slowing in the rate of rise. US exports to China are 7.1% higher than this time last year, rising at a record high level, and accelerating.