Mixed news for the Chinese economy from the two start of month surveys of manufacturing – it’s not in good health and a diagnosis of lacklustre would be in order, judging by the data.
The official survey of Manufacturing from China’s National Bureau of Statistics (NBS) saw a small rise back into positive (expansion) territory last month, but the rival private survey from Caixin magazine saw a surprise lurch into contraction with a reading under 50.
The differing results also told us something about the performance of the key parts of manufacturing – the official survey concentrates in large private and state-owned businesses, the Caixin survey covers small to medium businesses, most of which are privately owned.
The official survey’s small positive reading was the first in four months, the Caixin survey was the second negative reading in 20 months and came as a surprise.
The NBS survey rose to a reading of 50.1 in November from 49.2 in October, beating market estimates of 49.6. It was the first growth in factory activity since August and came amid an easing power shortage and a sharp drop in some raw material prices.
Both output (52.0 vs 48.4 in October) and buying levels (50.2 vs 48.9) increased for the first time in three months, while new orders (49.4 vs 48.8), export sales (48.5 vs 46.6), and employment (48.9 vs 48.8) all slow slower rates.
“A series of recent policy measures to strengthen the guarantee of energy supplies and stabilise market prices have shown results,” said NBS senior statistician Zhao Qinghe in a statement. With a recovery in the global economy and the approaching Christmas season, foreign trade has also continued to improve, he added.
Meanwhile the Caixin China General Manufacturing survey fell to 49.9 in November 2021 from 50.6 in October, missing market forecasts of 50.5.
It was the second contraction since April 2020, amid frequent COVID-19 outbreaks and weak demand.
New orders fell slightly following two months of expansion, both export sales and employment shrank for the fourth month in a row and buying levels declined further. Input cost inflation hit its lowest since October 2020, reflecting a drop in some raw material prices. Looking ahead, sentiment picked up amid hopes of improvement of the epidemic situation and the recovery of supply chains.
The official NBS Non-Manufacturing PMI for China was little changed at 52.3 in November from 52.4 a month earlier. It was the third straight month of growth in the China’s huge service sector, amid sporadic COVID-19 outbreaks and easing power rationing. Prices data showed input cost inflation eased sharply (50.8 vs 57.8).
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With the mixed results from these three surveys in mind, it’s no surprise there are now reports that economic advisors to President Xi Jinping and his ministers are talking about setting a lower growth target for 2022.
Reuters reported on Thursday night that “Advisers to China’s government will recommend authorities set a 2022 economic growth target below the one set for 2021, giving policymakers more room to push structural reforms amid growing challenges to the outlook.”
“Investors are closely watching for clues on next year’s policy and reform agenda as President Xi Jinping and other top leaders hold the annual Central Economic Work Conference due this month.”
“Three advisers told Reuters they have drafted recommendations for annual economic growth targets ranging from as low as 5% to 5.5%, ahead of the closed-door conclave, down from the “above 6%” target set for 2021.”
Next week sees data on China’s trade performance in November (expected to be reasonable, especially exports), inflation – lower, especially producer prices with the sharp slide in oil while data on loans and car sales are also due to release. The following week sees data on investment, retail sales and industrial production.
All three will paint a picture of a stuttering economy – watch especially for the up-to-date data on property investment, sales and house prices in the country’s 70 biggest cities. That will tell the real story, as will production data for steel, aluminium, cement, oil and coal (which will be up).
