Manufacturing crunch in China starts to ease

 
Tim Wallace
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FACTORY output in China stabilised in August after a sharp fall in June and July, according to an influential industry study published yesterday.

An improvement in sentiment will also raise hopes China could be in for a soft landing, easing worries that the its economy might have slowed down sharply and impacted on the global economic outlook.

Markit and HSBC’s purchasing managers’ index (PMI) hit a four-month high of 50.1 this month, a strong improvement from the downbeat reading of 47.4 recorded in July.

A score of above 50 indicates increasing levels of activity in the sector.

The manufacturing output index hit 50.6, bouncing back from its weak 48 figure in July.

The employment index remained below 50, but the decline slowed down, while the new orders part of the PMI registered an improvement in the month.

One possible blot on the picture is a fall in export orders, a decline which accelerated in the month and indicates weak demand from areas like the Eurozone which have traditionally been big buyers of China’s manufactured goods.

“The stark contrast between total orders and export orders suggests that it is a domestic-led recovery story, while the external situation remains lacklustre,” said Societe Generale economist Wei Yao after the data was published.

“The yuan appreciation against the backdrop of rapid depreciation of other emerging Asian currencies will only dampen China’s export manufacturing further.”