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China’s final Caixin manufacturing PMI at 47.2
KV Prasad Jun 13, 2022, 06:35 AM IST (Published)
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Summary
Unlike the government’s gauge that concentrates on large firms, Caixin’s survey focuses on smaller and medium-sized companies.
China’s final Caixin/Markit manufacturing Purchasing Managers’ Index (PMI) for September fell to a fresh six-and-a-half year low of 47.2, versus an earlier flash estimate of 47.
The private survey came on the heels of a separate gauge of manufacturing activity. The government’s official PMI rose to 49.8 in September, up from August’s three-year low of 49.7.
Unlike the government’s gauge that concentrates on large firms, Caixin’s survey focuses on smaller and medium-sized companies.
The official report from the National Bureau of Statistics was a pleasant surprise for markets, as several analysts expected either a flat or lower reading. A Reuters poll of economists expected 49.6, which would have marked the weakest level since August 2012.
Analysts said that while the survey indicated stabilization, manufacturing remained weak since September’s report marked a second consecutive month of contraction. Any number below 50 indicates activity is shrinking on a monthly basis, while one above indicates expansion.
“The reason why you could say the [official] report surprises to the upside is because for the last two months, the number has been slightly below than what you would expect on a historical basis. This 0.1 increase is roughly in line with what is done historically for the month of September,” Donna Kwok, senior China economist at UBS, told CNBC.
Chinese financial markets were closed Thursday for the start of a week-long public holiday, but the rest of Asian indices traded higher following the news. Australian shares led gains by 0.7 percent, while the Australian dollar added 0.1 percent against the greenback.
“With the world so sensitive to China’s growth prospects, today’s manufacturing and services reports could drive sentiment. The likes of copper, the Australian dollar and Australian resource plays should be most sensitive to the official manufacturing report,” remarked Chris Weston, IG’s chief market strategist, in a morning note.
Indeed, Australian miners rallied with BHP Billiton and Atlas Iron 1 and 3 percent higher, respectively.
A string of dismal economic indicators, such as August’s 5.5 percent fall in exports and recent stock market volatility, have heightened concerns about the world’s second-largest economy and fueled expectations for more monetary and fiscal support, such as additional interest rate cuts and lower bank reserve requirements.
As weakness in emerging markets increasingly gets blamed for global growth deceleration, International Monetary Chief (IMF) Christine Lagarde warned on Wednesday that Beijing must safeguard “demand and financial stability” and continue rebalancing its economy away from commodity-intensive investment.
“The greater concern around China is towards the drawdown of its foreign exchange reserves to offset the outflows from its economy. This has created a tightening of financial conditions and we simply can’t rule out further easing of the reserve ratio requirements or lending rates in the short-term,” Weston added.
Reserves dropped by a stunning USD 94 billion in August, the largest monthly fall on record, as Beijing intervened in markets to stabilize theyuan and its stock markets.
In other data released on Thursday, the official services PMI for September came in at 53.4, unchanged from August.
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