Activity levels for smaller Chinese manufacturing firms stagnated in August, partially reflecting the painful restructuring currently underway across the nation’s industrial sector, along with weak demand.
The Caixin-Markit manufacturing purchasing managers’ index (PMI) came in at 50.0, down from 50.6 in July. It was also marginally below forecasts for a decline to 50.1.
This specific PMI measures changes in activity levels for small- and medium-sized manufacturing firms in China from one month to the next. A 50 level is deemed neutral, implying that activity levels were unchanged from a month earlier.
According to Markit, “production and total new orders both rose at slower rates, while export sales continued to decline”.
“Data indicated that weak foreign demand continued to weigh on total new work, with export sales declining for the ninth month in a row during August. There were also reports that relatively subdued market conditions had weighed on overall sales in August,” said Markit.
It also noted that job shedding “persisted”, although it was at the slowest pace seen this year.
“This in turn contributed to a further rise in backlogs of work. Price pressures eased, with both input costs and prices charged increasing at weaker rates than seen in July.”
Here’s a chart of the Caxin-Markit PMI, going back to 2004. Although 50 is hardly a stellar outcome, it’s actually an improvement on the trend seen over the past two years.
The weak result came shortly after the release of the official PMI from China’s National Bureau of Statistics earlier in the session.
It showed that activity levels across the nation’s manufacturing sector expanded at the fastest pace seen since October 2014 in August, coming in at 50.4 from 49.9 in July.
Although the discrepancy between the two has raised some eyebrows, particularly just days before the Chinese city of Hangzhou hosts the G20 leaders’ meeting, it must be remembered that the survey’s aren’t identical in nature.
The NBS survey is larger in scale and captures responses from small, medium and large manufacturing firms across the nation’s public and private sectors. In comparison, the Caixin-Markit survey looks at activity levels for SME firms in China’s private sector.
Indeed, the NBS survey actually had activity levels for small and medium sized firms contracting in August, a result weaker than the Caixin-Markit survey.
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