SURPRISE REBOUND IN FACTORY ACTIVITY
Caixin/Markit manufacturing PMI rises to 51.8, the fastest expansion since December 2016
CHINA’S factory activity showed surprising signs of improvement last month, with growth picking up to a near three-year high, a private sector survey showed yesterday, reinforcing upbeat government data released over the weekend.
But analysts remain concerned about deflationary risks in the sector, unconvinced that the worst is over yet for Chinese manufacturers. They say the subindexes of both surveys painted a picture of patchy recovery that would be difficult to sustain.
“The improvement last month was driven by different factors across the two manufacturing indices, making it hard to pinpoint the reason for the apparent uptick industrial activity,” said Julian Evans-Pritchard, senior China economist.
“We doubt this marks the start of a decisive rebound in activity.”
The Caixin/Markit manufacturing Purchasing Managers’ Index (PMI) rose to 51.8 last month from 51.7 the previous month, marking the fastest expansion since December 2016, when it was 51.9. The 50-mark separates expansion from contraction on a monthly basis.
Economists polled by Reuters had expected a dip to 51.4.
Total new orders and factory production remained at buoyant levels last month, although they both eased slightly from record highs in the previous month, when they grew the fastest in over six years and nearly three years, respectively.
Macquarie Group chief China economist Larry Hu cautioned that the improvement could be hit as many one-off tailwinds wear off, such as better sentiment on trade deal and warm weather.
China’s official factory activity gauge on Saturday also surprised, returning to growth for the first time in seven months as domestic demand picked up in response to stimulus measures. But gains were slight and export orders sluggish.
The official survey focuses more on heavy industry than Caixin’s, , which is believed to include firms that are more export-oriented.
The Caixin survey showed subindex for new export orders came in at 51, marginally below that in October, when it was the highest since February last year.