Econintersect: The official PMI (Purchasing Manger’s Index) for China increased slightly from April to register a reading of 50.8. In April the number was 50.6. After the preliminary reading of the HSBC PMI last week came in below the 50 line which marks the boundary between expansion and contraction, many economists were expecting the official number to be less than April. To that extent the number reported could be considered encouraging. The Financial Times called the 0.2 gain a “rebound”, which may be a little overly encouraging.
There are two reasons that the HSBC preliminary PMI and the official number announced today differ.
1. The two cover different business segments. The HSBC survey covers mostly smaller and mid-sized privately owned businesses with a significant sensitivity to exports. The official survey is dominated by larger and government owned businesses with less sensitivity to fluctuations in exports.
2. The HSBC preliminary survey gives more emphasis to the earlier weeks of the month (excludes the last week). The final HSBC PMI for May will be released next week.
From Reuters the Financial Times:
“The slight rise in the manufacturing PMI shows the economy is stabilising,” said Zhang Liqun, an economist at the Development Research Centre, a top Chinese government think-tank, in a statement accompanying the latest reading.
Reuters said that “economy’s lack of vigour” made reaching the government’s target of 7.5% GDP growth more challenging.
From The Australian:
ANZ’s chief China economist Liu Li-Gang said the May PMI was at odds with the rest of China’s industrial economic indicators.
“This single data does not change our view on the softening economic conditions China,” he said.
“It eases some concern about a rapid slowdown though.
“The government can tolerate a slower growth rate but it is important to engage in fast economic and structural reforms to boost confidence in China’s future growth prospects.”
Sources:
- China May official PMI stronger than expected (Judy Hua and Kevin Yao, Reuters, 01 June 2013)
- Manufacturing rebound offers some comfort to investors (Jamil Anderlini, Financial Times, 01 June 2013)
- China’s PMI reading shows surprise strength in manufacturing (Scott Murdoch, The Australian, 01 June 2013)
