Chinese Manufacturing Grows Again, Leading to First Day of the Month Gains in the US Repeatedly

The past year and a half, the first day of the month has usually been an excellent day in U.S. markets as the Chinese Purchasing Manager (PMI) reports come in strong, leading to that overnight S&P futures surge.  Today appears to be another such day, barring some strangeness during the normal session.   Along with Mondays almost always being up, an even better strategy has been to buy the close the last day of the previous month and sell after the first day ramp up.  Indeed this has been an incredible strategy for well over a decade - China or no China [Sep 30, 2010: Amazing Statistic - Over 12 Year Period You Made More Money on 1st Day of Month then All Other Days Combined]

Larger picture it shows how far our world has changed... speculators worldwide now are as interested (and dependent) on Chinese data for their guideposts, over and above U.S. data. Even 5 years ago, this was not the case.

Please note aside from the headline data (there are 2 PMI readings, one private and one government), input prices surged - that is the inflation being created by all the easy money being tossed into the system.  As we've been opining for months the great mystery is who will eat this inflation - someone along the food chain has to, whether producer or consumer.

Via Bloomberg:

• China's manufacturing grew at a faster pace for a fourth straight month in November, indicating the economy can withstand higher interest rates as price pressures escalate.  The Purchasing Managers' Index rose to 55.2 from 54.7 in October, China's logistics federation said on its website today. That was more than the 54.8 median estimate of 14 economists surveyed by Bloomberg News. A PMI released by HSBC Holdings Plc also jumped.
• Today's reports showed input prices surging, reinforcing the case for the central bank to boost borrowing costs again after it lagged behind counterparts from Malaysia to South Korea. 
• “The risk of a sharp growth deceleration has abated, but all signs are suggesting that inflation may surprise on the upside,” said Tao Dong, a Credit Suisse AG economist in Hong Kong. He called input-price data “alarming.”
• The logistics federation's PMI showed the strongest reading in seven months, while the measure released by HSBC and Markit Economics was at an eight-month high of 55.3.
• The Chinese picture of stronger manufacturing and climbing prices was repeated across Asia in reports released today by HSBC and Markit for India, South Korea and Taiwan.
• In contrast, an Australian measure slid, a report by the Australian Industry Group and PricewaterhouseCoopers showed today. 

More on the surging input prices:

• The logistics federation's index of input costs rose to 73.5, the highest level since June 2008. The HSBC report showed that manufacturers increased output prices by the most since data began in 2004.

So what does that mean?  It means input prices are surging as they did during the commodities bubble from late 2007 to mid 2008 (right before the crash in global economic activity).   And China has chosen to not eat all of it, but is passing it along via output prices.