Intrepid Sourcing has documented in previous months the manufacturing Purchasing Managers Index (PMI). For November, this gauge of manufacturing activity came in at 51.0. A static industry would come in at 50.0, with everything higher signalling an expansion. Since July this trend of activity has continued to increase, spelling high times for Chinese factories.
Growth is down from the 2 year high of 51.2 seen in October. A boost in prices for building materials coupled with stronger demand for housing and infrastructure has eased off. Profits for industrial companies are still up from the previous year, with a 9.8% peak increase appearing in October.
The real test for the Chinese economy is expect to come next year. Levels of heavy investment by the government is expected to decrease. As a result, stimulus will be weaker. Influential fiscal measures will be used by the Chinese government.
Data derived by the survey conducted by Reuters is technically unofficial. Analysts however find the source trustworthy. Official data for China’s PMI might be bias. Universally, surveys agree November was a strong month for China.
Regardless, all of the main measures, such as the Reuters, official and Caixin PMI data is expected to signal expansion. Analysts unanimously agree the figure should fall from Octobers reading of 51.2, but still remaining above the stagnation level of 50.0
All signs continue to point towards a positive final quarter. The root cause is the buoyant manufacturing industry. 40% of China’s GDP depends on manufacturing. Clearly, favourable trends within this industry will create economic boosts. Manufacturing was an area experts were quick to identify as turbulent early on in the year. Foreign investors won’t need to fear a near future dip.
November also returned growing levels of exports and imports. Activity levels were on the up as well, and despite firms still reducing employees numbers, it occurred at a slower rate. China now finds itself on a strong footing. In turn, China’s strategy for next years economy may alter. Risk management and tighter controls may become a higher priority.
China’s PMI results bodes well, but does not portray the entire picture. Services are becoming an increasingly important industry for the country. Agriculture still employs around 35% of citizens. Stability can come in the form of all three sectors. Long term, the transitioning economy will begin to rely further on services. Fortunately, the service industry is looking healthy as well.
Universally experts are in agreement. China’s PMI data for November is surprising and well received. China’s economy is stabilising. Manufacturing has returned to highest activity levels last seen 2 years ago.