Ris­ing PMI level sig­nals re­cov­ery

China Daily (USA) - - CHINA - By WANG YIQING wangy­iqing@chi­nadaily.com.cn

China’s of­fi­cial Pur­chas­ing Man­agers’ In­dex for the man­u­fac­tur­ing sec­tor hit its high­est level in more than two years, higher than ex­pec­ta­tions and send­ing a sig­nal of the coun­try’s eco­nomic re­cov­ery.

Ac­cord­ing to the Na­tional Bu­reau of Sta­tis­tics, the PMI in Oc­to­ber reg­is­tered 51.2, the best per­for­mance since July 2014 and re­mark­ably higher than 50.4 in Septem­ber and Au­gust, and 49.8 a year ago.

The in­dex, which mainly mon­i­tors the ac­tiv­ity of large and medium-sized en­ter­prises, is a lead­ing gauge of the per­for­mance of the man­u­fac­tur­ing sec­tor. A read­ing above 50 in­di­cates ex­pan­sion in the sec­tor, while be­low 50 means con­trac­tion.

Three out of five subindexes of the PMI, in­clud­ing pro­duc­tion, new or­ders and de­liv­ery time, stayed in ex­pan­sion­ary ter­ri­tory. The pro­duc­tion subindex reached 53.3, com­pared with 52.8 in Septem­ber. The new or­der subindex rose to 52.8 from 50.9 last month. The two in­dexes reached their high­est lev­els this year, in­di­cat­ing faster growth of the sup­ply and de­mand sides in the mar­ket.

Ac­cord­ing to Zhao Qinghe, a statis­ti­cian with the NBS, the rapid growth of PMI in Oc­to­ber re­sulted from the re­cov­ery of pro­duc­tion and mar­ket de­mand, as well as the de­vel­op­ment of new eco­nomic growth en­gines and im­prov­ing in­dus­trial struc­ture.

“The PMI of the high-tech man­u­fac­tur­ing and equip­ment man­u­fac­tur­ing in­dus­tries have reached 53.7 and 52.3 re­spec­tively, which are both new highs this year,” Zhao added.

But the man­u­fac­tur­ing sec­tor still faces great chal­lenges, es­pe­cially for small and medium-sized en­ter­prises. Although the PMI of medium and small­sized en­ter­prises re­bounded to 49.9 and 48.3 re­spec­tively from 48.2 and 46.1 the pre­vi­ous month, the in­dexes re­main in con­trac­tion ter­ri­tory.

The Caixin/Markit Man­u­fac­tur­ing PMI, which mainly mon­i­tors the mar­ket per­for­mance of small and medi­um­sized en­ter­prises, rose to 51.2 in Oc­to­ber from 50.1 in Septem­ber, also the fastest growth in the sec­tor in two years.

“The econ­omy seems to be sta­bi­liz­ing for the mo­ment, ow­ing pri­mar­ily to poli­cies im­ple­mented to sus­tain growth,” said Zhong Zheng­sheng, di­rec­tor of macroe­co­nomic anal­y­sis at CEBM Group, a sub­sidiary of Caixin In­sight Group. “Sup­port­ive poli­cies must be con­tin­ued, or in­dus­trial out­put might be dragged down by a slow­down in in­vest­ment.”

“It is ex­pected China’s econ­omy will fol­low a smooth slope and level out,” Ren Zeping, chief econ­o­mist of Founder Se­cu­ri­ties, wrote in a re­search note.

It is ex­pected China’s econ­omy will fol­low a smooth slope and level out.” Ren Zeping, chief econ­o­mist of Founder Se­cu­ri­ties

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