Clyde Russell is a Reuters market analyst. The views expressed are his own.
LAUNCESTON, Australia, Jan 30 (Reuters) – While it’s probably going too far to say the China HSBC Purchasing Managers’ Index can be discounted, there are good reasons to be cautious about the weak January reading.
The final HSBC PMI dropped to 49.5 from December’s 50.5, falling below the 50-mark that separates expansion from contraction for the first time in six months.
The soft start to the year in global industrial powerhouse has raised investor concerns that growth in China, the world’s biggest commodity consumer, may disappoint and struggle to reach 7.5 percent, which is widely expected to be announced as the official target.
Hongbin Qu, chief economist for China at HSBC, said in a statement that the weakness in the PMI was led by weaker new export orders and “slower domestic business activities”. But is this really such a surprise? Export orders are always likely to come off post the year-end holiday season in the West and domestic business would already have been tailing off ahead of the Lunar New Year holidays, which start on Jan. 31.