Chinese Manufacturing PMI Data Disappointed Investors But Us Economy

European markets are trading lower on the first day of the new year after a disappointing economic data was released by the second biggest economy of the world. China released its manufacturing PMI data today which came in at 50.5, while the expectations were for 50.8. This is the third month consecutive month for the country that its manufacturing activity is declining. A reading above 50 represents expansion and below represents contractions.

This has increased further pressure for the president Xi who is already battling out his challenges such as crippling national debt and rising house prices. However, one should not read too much into this reading of manufacturing, because one of the main exporter for China, Eurozone, has emerged out of recession and this should increase the demand for Chinese products. On the other side of the Atlantic, US is ready to fire on all cylinders for the first time since the recession, and this should also lift the manufacturing activity in China in 2014.

We do have the US ISM manufacturing PMI data due later this afternoon, which is considered as the gold standard for forecasting the GDP growth, because this makes the biggest proportion of the GDP. Last week, we have seen that the pending home sales has increased to 4.4% beating the estimates, but the Chicago PMI data was softer with the final reading of 59.1. However, it was the Consumer Confidence reading which blown pass the expectations with a final reading of 78.1. We do think that the net wealth affect, increase in the consumer confidence could produce a better read for the ISM reading

Disclosure & Disclaimer: The above is for informational purposes only and NOT to be construed as specific trading advice. responsibility for trade decisions is solely with the reader.

by Naeem Aslam