China's Flash PMI Unexpectedly Expanded in August

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Aug. 22 (Bloomberg) -- Barclays Chief International Economist Julian Callow discusses China's latest Flash PMI number and its impact on the markets. He speaks with Anna Edwards and Mark Barton on Bloomberg Television's "Countdown." (Source: Bloomberg)

Back to barclays to discuss the chinese economy.

We have had a flash pmi manufacturing data, our first indication for the year, the latest month of how strong the manufacturing industry is, better than the overall market.

Absolutely.

A little bit over 50. last month, in china, the official pmi index was also a little bit above 50. it is kind of converging . the pmi tends to be more based toward the private sector company.

A similar message.

If you look at the breakdown, what you can see is there had to be significant destocking going on in the prior month.

The previously reading was very weak, almost as weak as it had been since the dreadful days of q1 in 2009, very weak.

It is an encouraging sign that suggests the manufacturing sector has overcome it.

It is consistent with other data, such as industrial production data, showing a little bit of farming coming through in recent months, also, the imports of various raw material and the production of raw material, in turn consistent with some activity in china investment activity.

It is one of those signs that said, you might think china is bound -- to slow.

It is not doing that with this latest set of data.

How does that relate to the turnaround?

We seem to be seeing in more developed markets?

That level of detail -- decoupling, cannot be explained?

You can never go so far.

You have to be very careful.

Anyone mentions the word the coupling.

We had that in europe around the year 2001 -- 2002. the economies are very integrated here.

In emerging economies, you are seeing a lot of indications of downside risk still.

I have noticed with our own forecast, week by week, there are various incremental adjustments down , forecasts, for example in indonesia and mexico down for brazil.

Maybe south africa, as well.

India supported very weak industrial numbers recently that were negative year on year for the second quarter of the year.

There is quite a lot of weakness.

The weakness of global trade and coming out of china, it also reflects what is going on with financial conditions.

Bond yields moving significantly.

Higher capital coming out of many of the markets.

There is compensation with weaker currencies.

You put it all together.

At the same time, the developed markets are showing better signs.

Europe is holding even.

It is a special sick -- statistical fact about gdp data that people need to pay attention to.

It all came from the industrial sector.

We saw enormous growth coming through the production, out of line with what the producers are doing.

The eurozone gdp is running more like flat.

The u.s. definitely has been showing better signs.

Again, we have to wait and see how the ongoing process of sequestration and of the response to higher bond yields in the united states may slow down the economy and little bit in the second half of the year.

The developed markets are doing a little better in the economies, led by the united states here.

In the immersing -- emerging barth -- markets, it seems china has found ways of achieving a little more stimulus.

What is not clear is whether that will really hold out over the next two or three years.

China has in reliance on debt to drive economic expansion and domestic demand.

It is clear the leadership wants to get away from that.

But it finds it is weaker.

It is a difficult challenge to drive growth without having another big goal --. the gdp point, which may be slightly overestimated.

It could be stagnant.

How does that play into today's pmi data, and which should the composite number showing a number of about 60. how does that play in?

What happened actually is, we show pmi as big indicators -- stronger than pmi numbers suggested, there is some catching up.

I am not saying it is negative.

What i am saying is, i do not see a lot of stimulus in the system in the euro area economy.

The exports sector is finding it tougher.

I am sure you see that with a lot of the corporate reports with the earnings season.

The euro area have to look at whether it has got enough domestic stimulus in place.

There are significant headwinds out there.

A lot of uncertainty and a lack of business confidence out there in southern europe.

We should be expecting numbers above 50. that is consistent with lower economic patterns.

We have had an incredible week.

Starting to normalize here.

The question is, is that enough to bring down unemployment?

When i look at these unemployment rates, and i see a rate of over 12% at the moment, it is the highest since the 1930's in the euro area.

We see much higher rates and rising rates elsewhere, rising in france and southern europe, much higher rates still.

I am concerned you have not got

This text has been automatically generated. It may not be 100% accurate.

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