What Is The Australian PMI Telling Us About Chinese Growth?

With the monthly slue of manufacturing PMI data now in we thought it interesting that Australia posted a nice rebound while China showed a further deterioration (Chart 1). Granted, the Australian data series is much more volatile than the Chinese series, but the two indices have been showing a divergence since early 2013. This is odd given the interconnection between Australia's commodity business and China's investment driven growth model. But, when we look at the New Export Orders component of the Australian PMI report and compare it to the headline Chinese PMI series (Chart 2) we notice that these two series recouped their correlation in mid-2013 and have both headed lower recently. That Australian export orders would correlate well with Chinese growth makes sense on the surface. That both series are on the verge of making new lows suggests to us that Chinese growth may disappoint this year.