China PMIs Signal Economic Improvement Across Sectors
The official manufacturing purchasing managers index returned to growth in September
- China’s official manufacturing purchasing managers index rose to 50.1 in September, ending a two-month streak of contraction.
- The private RatingDog manufacturing PMI increased to 52.1 in September, marking a five-month high and a 10th straight month of growth.
- China’s official nonmanufacturing PMI, which covers service and construction activity, rose to 50.2 in September from 49.0 in August.
China’s economy showed signs of improvement at the end of the third quarter, with official and private gauges of factory, services and construction activity all picking up.
Headline readings from four indexes came in above the neutral 50 threshold in September, pointing to resilient demand even as the war in the Middle East continues to disrupt supply chains and drive up costs.
Wednesday’s PMI prints are reassuring, said Capital Economics’ Nguyen Hoang Nam, attributing the pickup in momentum to China’s fiscal support starting to kick in.
Construction activity improved markedly as typhoon disruptions faded, while robust foreign demand continued to buoy manufacturing, the China economist said in a note.
The official manufacturing purchasing managers index returned to growth in September, ending a two-month streak of contraction. The headline figure rose to 50.1 from 49.8 in August, in line with economists’ forecasts in a Wall Street Journal survey.
The RatingDog PMI compiled by S&P Global—a private index that is more export-oriented—increased to 52.1 from 51.5. That marked a five-month high and a 10th straight month above the no-change threshold.
Total new orders grew for a 16th consecutive month, fueled by solid client demand and interest in building safety stocks as purchasing costs climb, said Yao Yu, founder of RatingDog.
New export orders indicated robust overseas market conditions too, though price pressures also strengthened, driven by raw-material prices, particularly for metals and oil.
A rebound in selling prices eased some of the margin pressure businesses have experienced in recent months, but cost inflation and continued supplier delays warrant attention, Yu said.
Meanwhile, China’s nonmanufacturing PMI, which covers service and construction activity, also swung back into growth territory, rising to 50.2 in September from 49.0 in August, the National Bureau of Statistics said.
The RatingDog services gauge pointed in the same direction, with growth accelerating for a second straight month, though at a modest pace.
Service providers were generally optimistic about the outlook for the year ahead, citing stronger market conditions, company expansion plans and new projects, the S&P survey showed. The degree of confidence rose from August and was the joint-highest recorded in the year to date.
Still, intense competition led services firms to discount prices in September, suggesting that it could be challenging to sustain the overall momentum in activity as demand remains fragile.
All told, Capital Economics views the PMIs in a positive light, showing better labor market conditions and more optimism among Chinese businesses.
“With policy support efforts ramping up, we expect a further recovery over the rest of the year,” said Nguyen.
Economists at ING noted that China’s State Council has already signaled more urgency in delivering stimulus, while the central bank has expanded its suite of targeted easing measures.
Further support is likely to be rolled out, which “should help China meet this year’s GDP target of 4.5%-5.0%,” said ING economist Lynn Song.
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