China: September PMI Improves For The Second Month

China’s official manufacturing purchasing managers index (PMI) shows improved for the second month in September 2011. The headline PMI rose from 50.9 in August to 51.2 in September, just slightly above market expectation of 51.1.

New orders index increased slightly from 51.1 to 51.3, and output rose from 52.3 to 52.7. Finished goods inventory increased from 48.9 to 49.9, indicating relatively robust manufacturing activity.

Input price fell from 57.2 to 56.6 after rising in July, indicating that while inflationary pressure is still present, it has remained relatively stable for now. Last month we noted that the new export orders index fell to below 50 for the first time since the economic recovery. For September, however, the new export orders increased from 48.3 to 50.9, which should provide a small relief for the time being.

Source: China Federation of Logistics & Purchasing

While the manufacturing PMI is still showing very modest pace of expansion, the HSBC’s survey has been in sub-50 territory for 3 months, so the manufacturing in China is only expanding in a slow pace, if at all. When if we compare the September PMI this year with the same month of previous years, the slight seasonal rebound of September of this year is like almost nothing compared with the Septembers since record begun. It is also worth pointing out that the current September reading is exactly the same as the September 2008 reading.

Furthermore, if you look at the new exports order alone, September is traditionally a strong month probably due to the Christmas orders. The September reading for this component of the PMI is totally unimpressive.

Source: China Federation of Logistics & Purchasing

Overall, it is a result which provides a bit of a relief for the time being, but I don’t want to read too much into one month of data as the economic outlook remains very uncertain everywhere. The US economy is probably headed towards a recession, and so is the European economy. The on-going debt crisis in China in the shadow banking system and the ready-to-burst real estate bubble will pose some real threat to the Chinese economy. Here, I am not getting any more optimistic after this otherwise encouraging number from the PMI report.

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About Zarathustra

Zarathustra: Founder and Managing Editor of Also sprach Analyst. Once an analyst, now an investor and entrepreneur. Based in Hong Kong, but Londoner at heart.