dailyreckoning.com.au / By Dan Denning / March 4th, 2013
China’s official purchasing manager’s index expanded in February. It read 50.1, according to the China Federation of Logistics and Planning, and anything over 50 indicates an expansion. It’s also a fact that the February reading was lower than the January reading. Cue the nerves about the strength of China’s expansion.
It’s not a fact that the China PMI is at all useful for investors. It’s a survey. And there’s no telling if the survey of China’s purchasing managers produces accurate information about what’s going on in the Chinese economy. And anyway, in causal terms, the PMI survey is secondary. In the world we live, the first cause of all growth is credit expansion.
Australian investors worried about China’s PMI should pay more attention to Chinese house prices. Some of those prices are rising ‘excessively fast,’ according to China’s State Council. The Council warned banks to raise interest rates and down payments, especially for second homes and investment properties. It’s worried that a property bubble is bad for social harmony.
Thanks to BrotherJohnF