China’s manufacturing PMI rebounded to 51.6 in February (vs 51.3 in Jan and an average 51.5 over the previous 3 months). The standouts were a rise in the export orders index to 50.8 – a 30 month high. Likewise the import orders index rose to a 60 month high of 51.2. Given the jump in import orders it’s therefore not too surprising to see commodities doing so well. Indeed, as the second chart below shows – copper prices turned at around the same time as the China manufacturing PMI started to rebound.
As I noted in a video last week the rebound in the manufacturing PMI along with rising property prices and inflationary pressures, there has been a shift in monetary policy from aggressive easing back in 2015-16 to now gradual and often stealth tightening. There is a risk that they go too far and that global forces or structural challenges cause the PMI to turn down again, so it remains an important global macro indicator to stay on top of.
The February manufacturing PMI for China rebounded and the breadth improved significantly – a sign of solid underlying strength.
The turnaround in the Chinese manufacturing PMI has been a key driver of the turn in copper prices.
