4 Reasons Why People Shouldn't Freak Out About China's 'Disappointing' PMI Report

China's official manufacturing PMI slumped to 50.4 in January, down from 50.6 in December.

Economists were looking for a reading of 51.0.

So, is this the end of the world?

No way, says Bank of America economist Ting Lu.

Here's an excerpt from a note Lu just blasted:

Why markets may not turn bearish despite the “disappointing” PMI?

First, most data points, especially the industrial earnings, have been pointing to an impressive recovery. Second, the private HSBC PMI, which is a better proxy for smaller enterprises, rose to 51.9 in Jan from 51.5 in Dec. Third, PMI data are heavily seasonally adjusted, especially during the year ends and beginnings. As there is big room of freedom regarding seasonal adjustment during the CNY holiday, it’s likely that the NBS statisticians intentionally reported a conservative estimate within the allowable range to save better data for rainy days. Finally, new orders rose to 51.6 in Jan from 51.2 in Dec despite new export orders falling to 48.5 in Jan from 50.0 in Dec, suggesting domestic orders jumped in Jan.

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