HSBC final China PMI edges up to 50.2, as domestic demand stays subdued
September reading falls short of preliminary estimate, but export orders make up slack
China’s factory sector grew in September after rising foreign orders made up for a subdued domestic market, a private survey showed, suggesting Asia’s economic powerhouse is starting to turn the corner, though a firm rebound remains elusive.
The final HSBC purchasing managers’ index (PMI) edged up to 50.2 in September from August’s 50.1, although that was below last week’s flash reading of 51.2, with domestic orders proving to be weaker than preliminary estimates suggested.
New export orders picked up the slack, climbing above the 50-point mark – which separates expansion from contraction – to 50.7, from 47.2 in August. After seasonal adjustments, however, the expansion was slight, HSBC said on Monday.
Still, the data should support financial markets and comfort investors eager to see China’s economy stabilise, even if the revival is likely feeble and perhaps even short-lived.
Qu Hongbin, an HSBC economist, said stronger manufacturing growth was driven by firms replenishing their stocks, albeit slowly.
“Growth is bottoming out on Beijing’s mini-stimulus,” Qu said, noting however that growth in domestic demand was unchanged from August.
Beijing’s policy action and a firmer economy in the United States – the world’s second-biggest buyer of Chinese exports after Europe – have put a floor beneath China’s economic growth, which has slowed in 12 of the last 14 quarters.
To reinvigorate growth, the central government has fast-forwarded infrastructure investment, lowered taxes for small companies and sustained spending in public housing.
But analysts warn that the mild pick-up in China’s economy could fizzle if Beijing keeps its promise and enacts financial reforms that include curbing state investment, a move that would hurt growth in coming months.
There are also signs in parts of the PMI poll that the economy is not out of the woods yet.
The survey showed factories cut jobs for the sixth consecutive month in September as workers resigned and firms downsized.
And although output and new orders were shown to have grown in September, HSBC noted that expansion was fractional after seasonal adjustments. In fact, it said some firms reported a contraction in output, citing unstable economic conditions.