The PMI is a precursor to future GDP performance and we've explained this relationship previously.
CPI/PPI ---> M1-M2 spread/3m-10y yield spread ---> PMI ---> GDP
Let's take a look at the PMIs now.
China - The PMI had rebounded from its trough.
USA - The PMI had started to decline.
From the PMI statistics, we've created a chart to show the positions of the US and China on the manufacturing life cycle.
In 2021, China had been reducing its credit impulse while the US had been increasing its credit impulse.
However, in 2022, the US will be conducting quantitative tapering (QT) by ending its asset purchases in March 2022 and hiking its benchmark rates. Conversely, China will be implementing quantitative easing (QE) by reducing its benchmark rates and increasing its liquidity in 2022.
In conclusion, China's GDP will be growing but the US GDP will be slowing in 2022.
1 comment:
https://finance.yahoo.com/news/1-china-aims-boost-big-031046176.html
We're right! Cheers!
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