As strong growth in the June quarter was confirmed for Australia, we had news from China with news that two surveys of the country’s huge manufacturing sector have shown a small recovery in momentum in August.
That’s good news as China is by far out biggest export market and the sole reason why the Australian economy grew at 1.2% in the 4th quarter and 3.3% for the year to June.
Elsewhere in the region, PMI survey results (Performance of Manufacturing Industry) fell close to their lowest points in a year and a half.
The HSBC PMI index for Taiwan fell below 50 for the first time in 18 months, sliding 1.3 points to 49.2 in August. Japan’s Nomura/JMMA PMI eased 2.7 points to 50.1.
South Korea’s PMI fell 2.3 points from July to 50.9 despite data released on Wednesday showing exports rose 29.6% in August compared with the same month in 2009.
Australia’s survey saw a contraction in August, down 2.7 points to 51.7. Sub-indexes measuring orders and shipments both fell, but employment again rose.
In the US The Institute for Supply Management’s (ISM) said its index of manufacturing activity improved, rather than fell as forecast.
The index rose to 56.3 in August..
The Markit Eurozone Manufacturing PMI for August dropped to 55.1 from 56.7 in July but nudged up from an earlier flash estimate of 55.0 and marked its 11th month above the 50.0 mark that divides growth from contraction.
Manufacturing growth in Germany slowed in August although other recent data show Europe’s biggest economy is expanding fast.
Business in France accelerated but Italy and Spain saw falls in their manufacturing indexes.
Britain, a major euro zone trading partner, saw growth in its manufacturing sector slow more than expected last month, led by the weakest expansion in new orders for more than a year.
For China, the two PMI surveys reversed the easing trend seen in the June quarter.
One of the surveys is sponsored by the government, the other is from global bank, HSBC.
The HSBC China Manufacturing Purchasing Managers Index, compiled by Markit research group, rose to 51.9 from 49.4, thereby regaining the expansionary territory after readings in July indicated the first contraction in activity in 16 months.
The government-run China Federation of Logistics and Purchasing rose to 51.7 from 51.2 in July — also indicating an expansion in manufacturing activity.
The Federation’s PMI had indicated manufacturing activity growth eased for the third straight month in July.
But unlike the HSBC survey, the Federation’s never showed a dip below 50 and therefore into contractionary territory.
Economists said the Federation’s PMI was underpinned by gains in production, a segment that accounts for a quarter of the overall headline figure.
A sub-index that tracks new orders rose to 53.1 from 50.9 in July. Export orders were also stronger, with up to 53.2 from 51.2 in July.
Other economists cautioned that the upturns, while encouraging, could also be the result of factories restarting after a summer break, or seasonal factor adjustment.
But the survey results do show the immense size and strength of the Chinese economy, which is encouraging for suppliers like Australia.
So far there’s been no sign the Chinese Government’s measures to cool the economy, especially property, have provoked a sharp fall in demand or output.
That’s good news for Australia.
Even though iron ore and coal prices will be lower in 4th quarter contracts, the falls won’t be enough to cause a blip for the companies or the Australian economy.
Some analysts are starting to see an upturn in Chinese steel output from late in the first quarter of 2011, which would help maintain iron ore and coal prices around the current high levels.
Meanwhile, our third biggest export market, India, saw a small rise in growth in the second quarter, but inflation remains a concern.
Figures out this week showed the Indian economy grew by an annual 8.8% in the three months to June, up from the 8.6% rate in the March quarter.
The growth in the first quarter of India’s financial year – which runs from April to March – was largely in line with expectations.
India’s manufacturing sector expanded a robust 12.2% in the quarter – but will slow in the coming months for statistical reasons.
(Steel production grew in the quarter).
But economists say farm output will be substantially stronger this year because of the solid monsoon rains instead of last year’s very dry conditions in much of the country.
Data indicates that India’s sown crop acreage is now 10% higher than it was at the same time last year.
Trade, transport and services also grew 12.2% in the quarter, up from 5.5 per cent last year, buoyed by a rebound in domestic air travel.
The country’s central bank has forecast growth in the year to March 2011 of 8.5%, the best for three years.
But wholesale price inflation (India’s dominant measure of inflation) is stuck around 10%, although analysts say good harvests after the solid monsoon will lower food prices and take some of the pressure out of prices.
But we can’t discount a rise in interest rates again from the central bank.
The Reserve Bank of India made it clear last week that its priority is to control consumer prices in the coming year.
Japan’s industrial production rose unexpectedly in July, up 0.3% after June’s 1.1% fall.
The news surprised economists who were expecting a small fall.
For the year to July, Japan’s factory output rose 14.8% and through June 2010, industrial production increased a revised 17.3%.
A big worry in the rise was that it disguised another month of easing car output.
Transport equipment, which makes up 17% of overall production, fell for a third
