ANZ: China October PMI unexpected jump

The October PMI data showed that China's official purchasing managers ' index jumped 0.9% to 54.7, significantly above the market's expected 53.8. According to the disaggregated data, the output index increased by 0.7% to 57.1. The order index was differentiated, with export orders showing a 0.2% per cent drop to 52.6, but the New Order index rose 1.6% to 58.2.　　It is noteworthy that the purchase price index has risen sharply in March, making it one of the most significant indices of the PMI index's rise. The market had previously expected a certain weakness or even decline in PMI, not only because China's electricity consumption has been on a month-on-month decline for several consecutive months, but also because the PMI index has a unique seasonal presence in China.　　The seasonal indicator is that China's PMI tends to peak in the three quarter and is starting to slide in the four quarter, but from October figures, the data is much higher than the third-quarter readings, which may give the market some misgivings. As we noted above, China's October PMI overall performance was good, indicating that China's manufacturing sector is still on a relatively strong upward trajectory, but the main boost is to buy price indices rather than core indices such as output and orders. In fact, rising prices also suggest that China's manufacturing sector is facing more severe cost pressures, and that such cost pressures will have significant upward pressure on consumer prices downstream. Coincidentally, the Chicago PMI index, released last week, also showed a notable rise in the price of its sub-items-the purchase price index jumped 14.9% to 68.9 in October.　　This may mean rising commodity prices are increasing the risk of global inflation, and as the Fed's weaker dollar continues, we believe that the upward trend in commodities will remain for a long time. From China's own perspective, we believe CPI inflation is far from peaking, thanks to excessive money delivery, better than expected economic performance and pressure on global commodity prices.　　The PBoC also needs to tighten monetary policy to prevent inflation and inflation expectations from spiraling out of control, and we believe that the PBoC will allow the renminbi to continue to appreciate, and that December will be the time for us to maintain a 25-point rate hike in the central bank this year. Liu Ligang Zhou Hao