A sign of hope for China's economy?
China's purchasing managers' increased slightly to 49 in February (from 45.3). It is now up significantly from the low of 38.8 that it hit in November and it is approaching the magical level of 50, which is the break even point between expansion and contraction.
Some are taking this as a sign that the Chinese economy may have bottomed while other analysts believe that this bounce in the index doesn't mean much and that a meaningful recovery in China will not begin until the second half of 2009.
There are rumblings that China plans to announce in the near future that it will increase its spending on welfare in the to prevent the social unrest that many fear it will experience if the jobs market does not improve soon. Additional spending in infrastructure may be announced as well.
The Mr. Chinese Market certainly looked at the manufacturing index news positively. The Shanghai the benchmark index rose 4.7% yesterday. While many of the predictions for 2009 that I wrote up last summer were likely too optimistic, I am still very comfortable with my forecast that Chinese stocks will significantly outperform U.S. stocks in 2009.
A sign of hope for China's economy