May 1st, 2012
Econintersect: The official Purchasing Mangers’ Index (China Statistics Bureau and Logistics Federation) for manufacturing in China came in at 53.3 in April, up from 53.1 in March. This was the fifth month above the 50 marker, the dividing value between expansion and contraction. Another (unofficial) PMI based on a survey compiled by HSBC Holdings (NYSE:HBC) is due out later today (1 May 2012). The HSBC PMI has been below 50 for sixth months in a row and last week had a preliminary report for April that was still indicating contraction. There is concern regarding the failure of the official survey and the HSBC tally to track each other well for the past half year.
The official numbers are sub-divided into two groups: (1) large and medium sized companies and (2) small companies. From Bloomberg:
The federation’s “large and medium-sized companies” sub- index was 53.7 for April while its “small companies” gauge was 49.1, the same as HSBC’s preliminary reading.
Factory output rose to 57.2 in April, up from 55.2 in March. Simon Rabinovitch in the Financial Times attributed the strong growth to manufacturers stepping up their restocking.
What does this mean for the Chinese economy for the rest of the year? Here is the take from the Financial Times:
Ting Lu, an economist with Bank of America Merrill Lynch who has forecast that China will grow 8.6 per cent this year, said the upturn in the PMI confirmed that outlook. But he said the signs of resilient growth should also cast doubt on expectations for more aggressive moves by the government to support the economy, since such measures are simply not necessary.
“Beijing will continue its pro-growth policies, but the markets should also be wary of overly optimistic forecasts,” he said in a note to clients.
Alistair Thornton and Ren Xianfang, economists with IHS Global Insight, also cautioned that China’s soft landing will be followed by an equally soft recovery. With labour supply increasingly tight, the government has less room to stimulate growth than in the past without causing inflation.
“There are signs of life in the economy and things should improve, all underpinned by an easing credit climate. But the recovery will be slower, more volatile and less assured than perhaps markets were hoping for,” they said.
- China PMI strengthens further in April (Simon Rabinovitch, Financial Times, 1 May 2012)
- China Manufacturing Growth Accelerates, PMI Shows (Bloomberg, 30 April 2012)
- China: GDP Slows to 8.1% Growth (GEI News, 13 April 2012)
- Will the Real Chinese PMI Please Stand Up (GEI News, 2 April 2012)
- China: Manufacturing Activity Falls Again (GEI News, 3 January 2012)