China’s Manufacturing PMI At Three-Month High

The struggling Chinese economy is showing some signs of recovery. HSBC’s manufacturing PMI number for China in August 2013 came in at a three-month high at 50.1, indicating an expansion in the manufacturing segment. The July PMI was at 47.7, the lowest in the last 11 months, and this had naturally raised concerns on manufacturing growth in Asia’s largest economy.

The data indicates that purchasing activity has risen for the first time from April 2013 as a result of increased production requirement and modestly higher buying. While this is the first expansion in the last three months, the rate of growth has admittedly remained very low.

New orders have also increased marginally for the first time since April 2013. New export orders, however, declined for the fifth month in row. The rate of decline in export orders was also faster than that seen in July 2013. The weak demand scenario in the US and Europe was behind this drop.

Employment levels have continued to fall, though the rate of decline is the slowest in the last four months.

In the month of August, the average input costs increased modestly. The manufacturers in turn passed on the increased costs, which bumped up the output prices. The rise in the output prices is a first in the last six months.

Commenting on the data, Hongbin Qu, Chief Economist, China & Co-Head of Asian Economic Research at HSBC said, “The final reading of August’s HSBC China Manufacturing PMI recovered to 50.1, from an 11-month low of 47.7 in July. This implies that growth in China's manufacturing sector has started to stabilise on the back of a modest rebound of new orders and output. This was mainly driven by the initial filtering through of recent stimulus measures and companies’ restocking activities. We expect some upside surprises to China's growth in the coming months.”