China’s Manufacturing Starts Expanding Again: Caixin PMI
China’s manufacturing activity expanded in August after shrinking for two months as factory output grew at its fastest clip in five months, a Caixin survey showed Monday.
The Caixin China General Manufacturing Purchasing Managers’ Index (PMI), which gives an independent snapshot of the manufacturing sector’s operating conditions, increased to 50.4 in August from 49.9 in the previous month.
The Caixin index, one of the earliest available monthly indicators showing the latest economic conditions in China, is closely watched by investors. A reading of 50 divides expansion from contraction. The higher above 50 the faster the expansion, while the further below 50 the greater the contraction. Manufacturing accounted for nearly 30% of China’s GDP in the first half of this year, according to government data (link in Chinese).
“China’s manufacturing sector showed a recovery in August, mainly due to improved production activity,” said Zhong Zhengsheng, director of macroeconomic analysis with consultancy CEBM Group, a subsidiary of Caixin Insight Group. “However, overall demand didn’t improve, and foreign demand declined notably, leading product inventories to grow.”
Manufacturers’ output expanded at the fastest pace since March, the survey showed. Companies that reported higher output generally linked this to firmer client demand, although the anemic growth rate was weaker than the historical average, according to the survey.
New orders placed with goods producers grew at a slower pace in August compared with the previous month, while new export orders declined at the fastest pace since November, with firms often linking lower export sales to weaker global demand and the ongoing China-U.S. trade dispute.
The employment subindex inched up to the highest point in five months, coming in a tad below 50, indicating that manufacturing employment was more or less stable in August, according to the survey.
Both manufacturers’ input costs and the prices they charge customers dropped last month. This indicated a downward trend in industrial prices, Zhong said.
The gauge for future output expectations, which measures how optimistic or pessimistic manufacturers are about their production for the following 12 months, inched down in August, although it remained in positive territory.
“China’s economy showed signs of a short-term recovery, but downward pressure remains a long-term problem. Amid unstable Sino-American relations, China needs to step up countercyclical policies,” Zhong said.
China’s official manufacturing PMI, released by the National Bureau of Statistics on Saturday, fell to 49.5 in August from July’s reading of 49.7.
The Caixin manufacturing PMI, sponsored by Caixin and compiled by London-based data analytics firm IHS Markit Ltd., focuses on light industry, while the official one focuses on heavy industry. The geographic distributions of the companies covered in the two surveys are also different.
The Caixin China General Services Business Activity Index for August, which tracks the growing services sector, will be released on Wednesday.
Contact reporter Liu Jiefei (email@example.com)
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