China Continues On Road To Recovery As PMIs Rebound

By Glenn Dyer | More Articles by Glenn Dyer

China’s economy seems to be getting healthier with the official June surveys of manufacturing and services (known as PMIs) both showing rises to new multi-month highs.

Both surveys come from the National Bureau of Statistics and the one most watched covers manufacturing where the purchasing managers index edged up to 50.9 in June from 50.6 in May.

China’s non-manufacturing PMI rose to a seven-month high of 54.4 in June from 53.6 in May, the statistics bureau said.

The reading for the manufacturing PMI was the highest in three months and the index has now remained above the 50 mark for four straight months. (a reading of 50 separates expansion – above – from contraction – below).

The production subindex rose to 53.9 in June from 53.2 in May. The overall-new-orders subindex rose to 51.4, from 50.9 in May, a sign of improving manufacturing market demand.

While new-export-orders subindex, a gauge of external demand for Chinese goods, climbed to 42.6 in June from 35.3 in May, it is still deep in contraction territory, underlining the chief problem about the performance of the Chinese economy – weak external demand from major export destinations such as Japan, the US, and the eurozone.

The subindex measuring imports rose to 47.0 from 45.3 in May. That is still in mild contraction and the trade data for June later this month should confirm that imports remain weak, but are improving – especially commodities such as oil, copper and iron ore.

Although the PMI index has rebounded this month and the manufacturing sector is steadily recovering, uncertainty remains the external demand, analysts said.

The subindex for small enterprises dropped to 48.9 from 50.8 in May, a concern given that many Chinese exporters are small to medium enterprises or supply larger groups.

Meanwhile, China’s official non-manufacturing purchasing managers index improvement (climbing to 54.4 in June from 53.6 in May) shows the health of the service sector is solid as consumers regain confidence,

The subindex measuring business activity in the service industry increased to 53.4 from 52.3 in May while the subindex measuring construction activity dropped to a still-high 59.8 in June from 60.8 previously.

The new-orders subindex for the entire non-manufacturing sector, a measure of demand, edged up to 52.7 from 52.6 in May.

The non-manufacturing PMI covers services such as retail, aviation, and software, as well as the real estate and construction industries.

Glenn Dyer

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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