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China manufacturing PMI is at a 24 month high. At 51.9, it's not all that much to get terribly excited about, nor is it all that unexpected.
Nonetheless, conditions show a temporary rise following a lengthy bout of contraction.
The HSBC Flash China Manufacturing PMI™ shows Operating conditions improve at the quickest pace in two years.
Key Points"Steam to the Recovery?"
Flash China Manufacturing PMI™ at 51.9 (51.5 in December). 24-month high.
Flash China Manufacturing Output Index at 52.2 (51.9 in December). 22-month high.
Commenting on the Flash China Manufacturing PMI survey, Hongbin Qu, Chief Economist, China & Co-Head of Asian Economic Research at HSBC said:
"At 51.9, January’s HSBC China manufacturing PMI rose for the fifth consecutive month to the highest level in two-years, heralding a good start to the New Year. Thanks to the continuous gains in new business, manufacturers accelerated production by additional hiring and more purchases. Despite the still tepid external demand, the domestic-driven restocking process is likely to add steam to China's ongoing recovery in the coming months."
I will take the other side of the steam to the recovery thesis. You cannot build much steam on inventory replenishment with weak (and weakening) external demand. Any steam needs to come from internal demand, and not internal demand caused by artificial stimulus measures.
Unfortunately artificial stimulus is all there is. I commented on this uptick in advance. For discussion, please see in Pettis: Nine Things to Watch in 2013; Unwarranted Outbreak of Optimism in China and Europe; The Great Rebalancing.
All is not what it seems. With China, it seldom is.
Mike "Mish" Shedlock