China: PMI improves in August
September 1, 2011
Manufacturing recovered somewhat in August, showing that economic growth is still on track despite a significant deterioration in external demand. The Purchasing Managers' Index (PMI) published by the National Bureau of Statistics (NBS) and the China Federation of Logistics and Purchasing (CFPL) grew to 50.9 points in August, slightly up from the 50.7 points recorded in the previous month. The August outturn broadly matched market expectations of 51.0 points and left behind four consecutive monthly declines. That said, the index continues to linger only slightly above the 50 point-threshold, which separates expansion and contraction. The bounce-back was mixed, as only 5 out of the 11 sub-indices recorded gains over the previous month. Solid increases were seen in the sub-gauges of stock of raw materials and backlog of orders. Meanwhile, production output, which accounts for 25% of the total weight, accelerated by 0.2 points in August after declining for the last four months. On the downside, export orders fell into contraction mode for the first time since April 2009 on the back of slowing global demand. Meanwhile, input prices rose 0.9 points, which might be a sign that inflationary pressures remain. Analysts consider the drop in export orders as a sign of weakening exports in the coming months, as global economic growth is faltering. Nevertheless, domestic economic growth has remained stable.