Everyone strangely relieved after China posts 12th straight month of industrial contraction data

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China Slowdown Industrial
Still shrinking, but at a slower clip.
Image: HSBC Flash China Purchasing Managers' Index (PMI)

For the twelfth straight month, monthly data shows China’s industrial sector was still contracting, though it doesn’t look like it’s getting significantly worse in October. HSBC’S Flash purchasing managers index—a survey of plant managers that handle orders for industrial supplies—came in below 50, which is consistent with shrinkage in manufacturing. But at 49.1, the number wasn’t as bad as September’s 47.9, which showed a much sharper slowdown. China-watchers are talking hopefully of a “strengthening recovery“.

Improving data can cut two ways however, note economists from Credit Suisse. “We think better flash PMI data would help reduce the market’s concern of a hard landing, though it also lessens the chance of seeing a large scale stimulus from Beijing,” they wrote. The Chinese government has been reluctant to step in with stimulus measures for fear of triggering inflation, as happened four years ago.