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This week we review the apparent rebound in the Chinese manufacturing sector, followed by a look at the quarterly Tankan survey results from Japan. Then we look at the U.S. PMI results which show grim signs; as do the housing and confidence figures. Finally we wrap up with a look at some other statistics from Japan in this top-3-economies-of-the-world version of the top 5 graphs of the week.

1. China PMI: Continued Rebound

China saw a continued rebound in its manufacturing sector, as indicated by the PMI results which had the official index rising to 53.8 from 51.7 in August, and the HSBC index also rising from 51.9 to 52.9. The rebound in the main index is a promising sign, indeed the new orders index rose to 56.3 from 53.1 while the export-order index rose only to 52.8 from 52.2. Also of note in the data was the rise in the input price index component, which rose to 65.3 from 60.5. Seasonal factors aside (it is supposed to be seasonally adjusted), i.e. filling orders for Christmas, the results show an end to the drop in the index. This is possibly a new revival as the Chinese economy continues to expand and personal incomes rise.

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2. Japan Tankan: Gradual Recovery

Another positive, but somewhat less so, was the Tankan September quarter survey results from Japan. The overall index improved to -10 from -15 in the 2nd quarter this year. Into the detail, the standout was medium-sized manufacturers, which saw a 10 point rise from -6 to positive 4, similarly, large manufacturers solidified their recovery, adding 7 points to positive 8. So in that negatives were getting less negative, and prospects were improving for the 3rd quarter. It was a good result. However, the December 2010 forecast figures were much less optimistic, with most firms expecting a reasonable deterioration in conditions. So the story is basically, small improvement, outlook not great.

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3. U.S. PMI: Grim Signs

The U.S. also released its PMI results this week, showing what appears to be a continued turn in prospects. If you recall, there was a time when people were asking "what will happen when the inventory cycle and stimulus runs out?" And here's your answer, not a whole lot really for the U.S. The PMI index fell from 56.3 to 54.4 with the only real strength coming from an increase in the prices sub-index from 61.5 to 70.5, a significant increase. Stagflation anyone? All the other indexes that you usually want to see rise didn't, so not a great result from the U.S.

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4. US Housing and Confidence

Staying with the U.S. (and thinking about gloomy economic prospects): Here's the U.S. housing market and consumer confidence data details that came out this week. The U.S. housing market continued to flat-line (no surprises there), and will likely do so for an extended period. Meanwhile the U.S. consumer also basically flat-lined, if not deteriorated a little. The Conference Board Consumer Confidence index came out much worse than expected at 48.5 vs 53.5 in August, the present situation index decreased to 23.1 from 24.9 and the expectations index fell to 65.4 from 72 in August. So overall, while it's still not panic time, things are just not good, and they will continue to muddle along because of the damage caused by the excesses that caused the financial crisis.

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5. Japan Inflation and Unemployment

Back to Japan, there were some slight improvements in the inflation and employment situation, with the unemployment rate dipping to 5.1% from 5.2%, and the deflation rate improving slightly to -1.0% from -1.1% in July. So onward with the gradual export driven recovery in Japan - "Yentervention" or not. So it seems that some progress might be getting through from the Bank of Japan in its desperate struggle to stem deflation and stimulate the economy. But there are still serious challenges for the Japanese economy, at least it has China as its neighbor and trade partner, otherwise, muddle along too.

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Summary

This week we looked at the three largest economies as they release indicators on the prospects of their manufacturing and business sectors. China showed pretty good results all round, Japan showed slight improvement, and the U.S. did not impress with its PMI results. The story of continued economic growth (catch up) and expansion in China remains intact, and the story of a long hard slog in the U.S. and Japan also remains intact.

Japan and the U.S. are the real spots to watch as the global recovery unfolds, though emerging markets are coming up fast and strong. It is these two pillars of stability that will drive or fail to drive much of the growth in the near term. Unfortunately things are still subdued in the U.S. as it goes through the muddle ages of the recovery, and even Japan is showing potential warning signs of a double-dip.

Go emerging markets, hang in there developed markets...

Sources
1. CFLP & Markit/HSBC & Yahoo Finance
2. Bank of Japan
3. Institute for Supply Management
4. Standard & Poors & Conference Board
5. Trading Economics


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Source: Top 5 Economic Graphs of the Week: World's Top Three Economies