China PMI Rises in November, Inflation a Concern

Includes: CAF, FXI, GXC, PGJ
by: Cullen Roche

A bit of a mixed bag here in the China PMI report. While manufacturing continues to expand we are also seeing record movesin 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