China Private Sector PMI Numbers Sound the Alarm Bells

It was a busy Wednesday morning on the Asian economic calendar, with economic indicators from Japan, New Zealand, and Australia in focus. However, private sector PMI numbers from China garnered the most interest.

NBS Manufacturing and Non-Manufacturing PMI figures for May gave investors a better view of the macroeconomic environment midway through the second quarter.

The NBS Manufacturing PMI declined from 49.2 to 48.8, with the Non-Manufacturing PMI falling from 56.4 to 54.5. Economists forecast the NBS Manufacturing PMI to rise from 49.2 to 49.4 and the Non-Manufacturing PMI to fall from 56.4 to 55.0. The NBS numbers are a precursor to the Caixin Manufacturing PMI numbers that will have more impact on riskier assets.

While the PMI numbers influenced market risk sentiment, the RBA will consider the latest inflation numbers from Australia.

Australia’s annual inflation rate softened from 7.0% to 6.8% in April versus a forecasted 6.4%.

According to the ABS,

• Housing (+8.9%), food & non-alcoholic beverages (+7.9%), and transport (+7.1%) were the main contributors.
• Other notables included rent prices, which increased by 6.1% in April versus 5.3% in March.
• Automotive fuel prices also increased, rising by 9.5% in April to reverse an 8.2% decline in March. Adjustments to fuel excise tax contributed to the April jump in fuel prices. However, fuel prices were up 2.9% month-on-month.

The latest inflation numbers from Australia and PMI figures from China reflect the challenging times for central banks.

AUD/USD Reaction to China Private Sector PMIs

Ahead of the PMI and CPI numbers, the AUD/USD rose to an early high of $0.65219 before falling to a low of $0.65102.

However, in response to the numbers, the AUD/USD struck a post-stat high of $0.65382 before sliding to a low of $0.64924.

This morning, the AUD/USD was down 0.15% to $0.65065.

Next Up

Looking ahead to the US session, it is a relatively busy day on the US economic calendar.

JOLTs job openings will be the main report as investors prepare for Friday’s US Jobs Report. While the headline figure will influence, investors should consider quit rates. A pickup in quit rates would signal employee confidence in US labor market conditions.

However, FOMC members will also need consideration. FOMC members Harker and Bowman are on the calendar to speak today.

While the numbers and Fed commentary will influence, investors should monitor US debt ceiling-related news. Lawmakers could vote on the deal later today.