China’s manufacturing sector remains on the expansionist track it has been on for most of this year with the strongest rise in 16 months in August.
The news, which echoes a similar rise by the Australian manufacturing sector last month, will be followed overnight by similar reports on the manufacturing sectors of Europe and the US.
Most produced mostly positive news.
The US saw the first growth in more than a year (like Australia), Germany and France were stronger, but Italy, the UK and Spain saw contractions.
And the HSBC PMI for China, previously released by CLSA Asia-Pacific Markets, showed an overall increase to 55.1 from 52.8 in July and a jump in export orders.
China’s official Purchasing Managers’ Index rose to a seasonally adjusted 54 from 53.3 in July, according to the state-sponsored Federation of Logistics and Purchasing in Beijing.
(A reading above 50 indicates an expansion.)
The news helped steady jittery Chinese sharemarkets and pushed Asian markets, including Australia, higher in the afternoon.
But European and US markets fell sharply on renewed fears about the health of financial groups, fears that emerged from nowhere.
That’s despite the better than expected uS PMI and a strong rise in pending home sales.
Economists point out that the PMI style of survey looks forward and back, unlike economic growth figures.
For that reason this survey and one for the services sector (due out later in the week in Australia, China and other economies) are watched closely by central banks.
China’s survey which is conducted by the National Bureau of Statistics covers purchasing and supply managers in more than 700 companies across China.
The survey showed that the purchasing price index climbed 2.7 percentage points to 62.6 in August, the ninth monthly increase since December.
The August output index was 57.9 points, up 0.6 percentage points from a month ago. The new order index was 56.3 in August, up 0.8 from July.
But there was no change in the new export order index from the July reading of 52.1, suggesting that the downturn in exports continues.
The import index rose to 51.3, up 2.4 percentage points from July.
All in all the index paints a picture of an economy growing quite strongly domestically, but with nothing happening externally, except rising levels of imports to feed the rising internal demand.
It’s further confirmation that the domestic stimulus spending program in China is working and that the fears about a cutback in lending, or a firmer monetary policy are a bit whonky.
Most of the lending was done in the first quarter; the loans are now being used, so lending has slowed in July and August.
The improvement in output, orders and jobs adds to the growing belief for some economists in China that the country will meet its 8% growth target this quarter, or in the December quarter.
Eighteen industries, including petrochemicals, beverages, metal processing and equipment manufacturing reported expansions. Only textiles and pharmaceuticals contracted.
China’s economic growth accelerated to 7.9% in the June quarter.
In the US the Institute of Supply Management said its August survey index rose from 48.9 to 52.9, topping all forecasts.
It was the first time in 19 months that the index had exceeded 50.
The rebound in the car sector, thanks to the ‘cash for clunkers’ scheme is believed to have improved the sector, and lifted future expectations.
