The US ISM index is the latest piece of US data that has been on the weaker side, along with softer housing market data, durable goods and the poor payrolls result for December.
Most are pointing to the cold weather as playing a key role as it has in other data. Weaker activity is also likely to be a function of high inventories, that have risen quite a bit into end 2013s.
Looking at the bigger picture, activity in the US has been patchy for a couple of years, so perhaps this is the first sign of another fade out. It cannot be ruled out, although one month of data doesn't make a trend. And at this stage its probably not going to sway the FOMC from their current tapering schedule, especially when market interest rates have fallen in the last few weeks.
The China PMI data were also weaker, but elicited a wider range of reaction for such a small move in the index. The IMF response in this blog post from the Asia Pac division chief is the typical bullish view and is surprisingly less measured than most commentary you see published from the IMF. The bear response is that its the beginning of the great unravelling on the Chinese economy given the gyrations in financial markets.
In some ways the gyrations in SHIBOR markets is normal, with rates also spiky when the PBC tightened liquidity in early 2011. The problem now though is the flow on effects are much larger given the explosive growth in shadow financing, which is largely done relative to interbank rates.
So it will pay to be continue to be cautious on the downside risks to Chinese growth. This doesn't mean you have to believe a crash is imminent. But certainly the risk of that is increasing and the starting point on overall growth is fairly sanguine at end 2013.
The better news was contained in the EU and Japanese data, which both saw chunky gains. In some ways this mix of strength and weakness is not so bad, given both the US and China are in a better position to deal with slower growth than Japan and Europe.
But overall the data are bearish, not withstanding the large movement we have already seen in markets.
Most are pointing to the cold weather as playing a key role as it has in other data. Weaker activity is also likely to be a function of high inventories, that have risen quite a bit into end 2013s.
Looking at the bigger picture, activity in the US has been patchy for a couple of years, so perhaps this is the first sign of another fade out. It cannot be ruled out, although one month of data doesn't make a trend. And at this stage its probably not going to sway the FOMC from their current tapering schedule, especially when market interest rates have fallen in the last few weeks.
So it will pay to be continue to be cautious on the downside risks to Chinese growth. This doesn't mean you have to believe a crash is imminent. But certainly the risk of that is increasing and the starting point on overall growth is fairly sanguine at end 2013.
But overall the data are bearish, not withstanding the large movement we have already seen in markets.
