“Flash” PMIs for November released this morning confirm a Eurozone recession while suggesting that Chinese industrial momentum has slowed abruptly. The latter indication, however, is at odds with other recent evidence. The latest regional Fed manufacturing survey, meanwhile, echoes an improvement in optimism in other recent polls.

Asian equity markets were knocked back by release of the Markit Chinese manufacturing PMI data, showing a slump in new orders in November, reversing surprising strength in October. The Markit survey, however, sometimes diverges from the more reliable official PMI, November results for which will be released at the start of December – note the misleadingly-weak Markit new orders reading in mid 2010.

The suggestion from the Markit survey of an abrupt weakening of Chinese industrial activity sits uneasily with other recent evidence, including a firmer leading indicator and less negative company earnings revisions.



Chinese real money trends, meanwhile, were signalling economic weakness earlier in the year but have recently started to recover.


Bottom line: the Markit results are probably erratically weak but will add to pressure for policy easing.

The Eurozone flash PMI new business indicator recovered marginally in November but remains in recession territory. The small rise was due to services with the manufacturing new orders index falling further.


Recent US manufacturing surveys, by contrast, have indicated stable current order flows and rising optimism about prospects. With three of the five regional Fed polls so far released (New York, Philadelphia and yesterday's Richmond), an average of orders outlook indices has risen to its highest level since April.