No joy for commodities from the still sluggish Chinese economy – but don’t tell the headless chickens among local investors who blasted our market 2% higher yesterday in the face of the weak news from China and the plunge in iron ore prices to new multi year lows.
The government and private surveys of Chinese manufacturing activities, released yesterday an hour or so apart, confirmed the slowdown continued in November, with no positive sign for investors to hang on to and hope.
The Shanghai stockmarket edged up another 0.3% yesterday, despite the news of the still weak manufacturing sector.
The Caixin/Markit survey of small to medium Chinese companies reported a preliminary reading of 48.6 in November, against market hopes of 48.3 and 48.3 in October.
That means the reading has been under the threshhold of 50 (separating contraction from expansion) since February on this year.
And even though the outcome was higher than in October, no one got excited. Chinese manufacturing is still stuck in a deflationary rut and the slide in commodity prices in November will not have made the key producer price inflation report any more reassuring from when it is released next week.
Earlier, the Chinese government survey of manufacturing produced a preliminary reading of 49.6 (it targets mostly larger companies).
That was the fourth consecutive month of contraction and below the 49.8 result the market had been looking for. The official survey reading was down on the 49.8 figure for October, meaning the two surveys sort of balance each other out in the end.
The Financial Times reported that the highest reading for the manufacturing sector so far this year was 50.2 in May and June. But it has been downhill since then, returning to the sub-50 readings of earlier in the year.
But all is not gloomy in China – the official survey of activity in China’s growing services sector produced another solid plus 50 reading of 53.6, up from the 53.1 in October.
It has yet to fall under 50 this year and helps explain why there’s considerable gloom about the economy and manufacturing. The still expanding services sector is supporting the sluggish economy, as the government wants it to do.
