The tale of two PMIs: official and HSBC China PMI continue to diverge

Yesterday, the official PMI showed continued expansion in manufacturing. Today’s HSBC/Markit China manufacturing PMI, on the other hand, remains in the contractionary territory for the 6th consecutive month, with the latest reading at 49.3, slightly improving from 48.3, indicating a slowdown, albeit a slower slowdown.

Usual explanation on that is that HSBC’s PMI is more heavily weighted towards smaller enterprises, while the official one has a larger sample size and include large companies, which are weathering the current slowdown better. Or at least, it seems to be.

Of course, one could point out that there is actually a small enterprises component for the official PMI. In the latest reading, the small enterprise component of the official was 49.1, and that is much more in-line with the HSBC numbers, with both showing contraction in manufacturing activities in China’s smaller companies.

The chart below from Michael McDonough of Bloomberg Brief slows the continued divergence in two PMIs’ headline numbers.

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About Zarathustra

Zarathustra: Founder and Managing Editor of Also sprach Analyst. Once an analyst, now an investor and entrepreneur. Based in Hong Kong, but Londoner at heart.