ExplainerAs China’s ‘shock and awe’ strategy simmers: 4 takeaways from September’s PMIs
China’s official manufacturing purchasing managers’ index hit a five-month high, but reading from a private survey slipped into contraction
1. Manufacturing hits 5-month high, but activity remains subdued
It exceeded the expected reading of 49.5 predicted by economists polled by Bloomberg but remained in contractionary territory for the fifth consecutive month, “signalling still-subdued factory activity”, according to analysts.
A reading above 50 typically indicates an expansion of economic activity, whereas a reading below implies a contraction.
“The upside surprise was largely due to incomplete seasonal adjustments, as September is usually a month of more robust manufacturing activity, rather than a real improvement in the economy,” said analysts at Japanese investment bank Nomura.
Within the official manufacturing PMI, the new manufacturing export order subindex fell to 47.5 in September from 48.7 in August.
The reading, which has a greater representation from smaller, privately owned companies, compared with the official PMI, fell short of analysts’ forecasts for a reading of 50.5 in a Bloomberg poll.
“The NBS and Caixin manufacturing PMIs pointed to different directions for the manufacturing sector in September, potentially due to their differences in sample coverage,” said analysts at Goldman Sachs, as the Caixin survey is conducted in the middle of the month, while NBS survey is conducted between the 20th and 25th of the month.