The official PMI is 50.2, back in positive territory. Yay for China’s manufacturers, right?
Well, sort of, given how mixed the picture is.
Below is a breakdown of components in the official PMI survey over the past three months, via Nomura:
The best signal here is that new orders are positive at 50.4, but this is dampened by new export orders remaining in the below-trend, sub-50 range.
Two of the other components stand out to us as taking the shine off the overall positive figure. Firstly, the component with the biggest jump is “input prices”, now at 54.3 from 46.1 just two months ago. At least they’re no longer indicating deflation. But is this the component that you want to see improving most rapidly? Employment meanwhile is only slightly better — up to 49.2 from from 48.9.
The notes accompanying the final HSBC/Markit Economics PMI report (which LR members can read here) add some colour to this. Their final October result showed continuing sub-trend growth (49.5), but this was quite an improvement from the 47.9 in September. Yet, digging into the detail shows an underlying picture that is still rather mixed, as the official survey suggests.
New export orders survey replies contained more bad news than good:
The index indicated that the rate of reduction was slower than in September, posting a three-month high, but remained marked. Over 17% of survey respondents reported a fall in the volume of new export orders, and just under 10% noted an increase. A number of respondents suggested the fall in new export orders was caused by deteriorating global demand, particularly in Europe and the US.
Overall new orders were more mixed:
The seasonally adjusted index indicated the growth rate of new orders was only marginal. However, it was the second-highest index reading in the past 17 months. Nearly 20% of panellists noted an increased amount of new orders, whereas just over 18% reported a fall.
And, employment was not encouraging:
The seasonally adjusted Employment Index signalled a modest reduction of staff numbers, which was broadly similar to September. Nearly 10% of respondents recorded job shedding, whereas just over 5% reported a rise in staff levels. Anecdotal evidence suggested that job shedding was linked to lower production requirements.
China’s manufacturers return to growth – FT