Capital Economics’ chief Asia economist Mark Williams has warned against reading too much into the unexpected swing in the official Chinese manufacturing purchasing managers’ index (PMI) released last night.
The PMI data released by the China Federation of Logistics and Purchasing (NBS) rose from 50.1 to 50.3 – analysts had expected a fall to 49.8 (anything above 50 indicates growth, below indicates contraction). This stands in contrast to the HSBC/Markit estimate, which hit an 11 month low when it dropped to 47.7 from 48.2.
Williams says this discrepancy arises from the fact the official PMI figure gives a large weighting to heavy industry – in which there has been evidence of a recent turnaround. For example, sales of construction equipment have been picking up, steel prices have rebounded since the end of June and electricity consumption by heavy industry has regained some momentum.
So what do the two measures have in common? New export orders in both rebounded after a fall in June, but continue to contract (47.7 by HSBC/Markit’s measure, 49.0 on the official one). And employment is also still contracting. The HSBC/Markit employment component fell slightly to 47.5 from 47.6 while that of the official survey rose to 49.1 from 48.7.