PMI data points to recovery on rise in domestic demand
Print Edition
CHINA’S manufacturing and service activities in September appeared to have bottomed out in large state-owned enterprises but continued to weaken in private and export-oriented firms, according to surveys released yesterday.
The official Purchasing Managers’ Index, a comprehensive gauge of operating conditions in large state-owned industrial companies, landed at 49.8 last month after August’s 49.7, according to the National Bureau of Statistics and the China Federation of Logistics and Purchasing.
A reading below 50 is contraction. The latest figure was the first rebound in three months, although still in negative territory.
The official non-manufacturing PMI, a gauge of conditions in the state-owned service sector, was 53.4 in September, the same as the previous month.
Zhao Qinghe, an analyst at the bureau, said the figures indicated stabilization in the economy thanks to slightly better domestic demand and easing policies.
“The data lent some optimism, and we expect more improvement with the supportive measures taking effect,” Zhao said.
The official PMI’s component indexes showed industrial production added 0.6 points from a month earlier to 52.3 in September, while new orders increased 0.5 points to 50.2. The components in the official non-manufacturing PMI also showed improvement in both production and demand, partly due to the arrival of the weeklong holiday to celebrate yesterday’s National Day.
However, the performance in private and export-oriented companies proved disappointing.
The Caixin China Manufacturing Purchasing Managers’ Index, a similar indicator slanted toward private and export-oriented companies, landed at 47.2 last month, down from August’s 47.3 to become the worst in six and a half years.
The figure has been below 50 for the seventh straight month after a brief rebound in February.
The Caixin Services Business Activity Index posted 50.1 in September, decelerating from 51.5 in August and signaled the slowest increase in the current 14-month sequence of expansion.
He Fan, chief economist at Caixin Insight Group, said the data indicated continued economic weakness, although the pressure driving the declines had eased.
“The industry has reached a critical stage in its structural transformation, and tepid demand is a main factor behind oversupply of manufacturing and why it has not recovered,” He said.
Earlier data showed that profits of China’s industrial companies fell more than expected in August, dropping 8.8 percent from a year earlier to 448.1 billion yuan (US$70.6 billion).
China’s economic performance surprised the market with a 7 percent increase in the second quarter.
But data in the past three months for trade, industrial production, retail sales and fixed-asset investment all showed little cause for optimism.
Liu Ligang, an economist at Australia & New Zealand Banking Group Co Ltd, said the readings suggested third-quarter gross domestic product may slow to as weak as 6.4 percent. “However, as monetary policy easing and expansionary fiscal policy gradually take effect, we expect GDP growth to modestly rebound to 6.8 percent in the fourth quarter, leading to a full-year growth of 6.8 percent,” Liu said.
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