The economic recovery in China is alive and well according to the latest PMI report from HSBC. The index surged to 54.8 from 52.9 in October. The key points:
- Strong domestic demand drives production higher.
- New export orders rose only modestly.
- Input price inflation the fastest in over two years.
Hongbin Qu, Chief Economist of China Economic Research at HSBC summarized the report:
“Another upbeat reading for the HSBC China Manufacturing PMI suggests the strong growth momentum in domestic demand to warrant around 9% GDP growth in 4Q, despite the still soft increase in new exports orders. The jump in output prices reflects higher input costs amidst strong demand, which also heralds a higher CPI likely to reach its cyclical peak in October.”
This is likely good news for U.S. equities as well. Although this means little for the macro picture in the U.S. it is important that we continue to see strength in the Chinese economy. The earnings rebound is increasingly dependent on revenue growth in the Asian economies. China, obviously, is the strong leg in this growth.