Caixin China Manufacturing PMI Meets Expectations

A survey concerning small and mid-size businesses in China met expectations on Wednesday.

Economists’ expectations of the private PMI reading were to be at 51.0 for October, showing no change from September. The Caixin/Markit manufacturing Purchasing Managers’ Index (PMI) for October reported at 51.0.

Even though the reading showed minimal improvement in manufacturing operating conditions all-throughout China, the increase, according to a joint press release made by Caixin and Markit, in production was in its weakest pace in four months. But together with the growth in new orders, Caixin/Markit added, it could mean that the outstanding business sector went through an increase.

"The stringent production curbs imposed by the government to reduce pollution and relatively low inventory levels have added to cost pressures on companies in midstream and downstream industries, which could have a negative impact on production in the coming months," said an analyst from a Caixin subsidiary.

Strong growth has been shown by the Chinese economy this year, but many assumes that the mainland’s economy will slow down in the latter part of the year due to a restriction on debt as the property market cools.

When compared with the official PMI, the Caixin/Markit survey focuses more on the small and mid-sized manufacturers.

China’s PMI Report Misses

China’s report on Tuesday regarding its official manufacturing PMI missed expectations at 51.6.

Analysts’ predictions were down from 52.4 in September to 52.0 for October. A reading above 50 shows expansion while a reading below that indicates contraction.

"Economic activity cooled this month, most likely due to disruptions to industrial activity in north-eastern China as a result of the ongoing environmental crackdown, as well as softer investment spending in response to slower credit growth and the unwinding of pre-Party Congress fiscal support," a China economist said in a note that followed the data release.

On the other hand, according to a report made by the National Bureau of Statistics, official services PMI fell to 54.3 in October from 55.4 in the previous month.

The PMI released on Tuesday stood as the country’s first data release after last week’s Communist Party leadership conference.

Another economist stated that a slowdown in Chinese growth would actually be good seeing as the Chinese economy had been growing too fast on credit. “We kind of want them to slow down,” he added, pointing out that real growth in medium term needs to move down to 5.5 percent in order for credit expansion to be in line with GDP growth.

Premier Le Kiqiang made a statement earlier this year where he said that China is officially targeting a round 6.5 percent economic growth in 2017.

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