China PMI Points to Rising Inflation Risks

Econ Grapher submits:

China Just saw the release of its two PMI indexes for February; the official CFLP (52.2 vs 52.9 prev), and the HSBC (51.7 vs 54.5). Though both indexes fell, they remained above 50 and generally did not point to any significant slowdown. But the warning signal that did come out of the numbers was for further upside inflation risks.

The HSBC "Input Prices" sub-index came in at 74.6 vs 71 in January, as a surge in commodity prices put increasing upward pressure on prices in China and other emerging markets. Another index to rise was backlogs of work, with comments from HSBC/Markit noting "about 17% of manufacturers said the rise in unfinished work was due to growing capacity constraints." The report also highlighted that manufacturers were broadly able to pass on higher costs to customers, which is good for profit margins (and thus earnings, and stocks - assuming no PE


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