Rising PMI level signals recovery
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