Two surveys on Chinese manufacturing released today show a rebound in growth, indicating that the underlying foundations of the world's fourth-biggest economy are solid.
Brokerage house CLSA's Purchasing Managers' Index (PMI) hit a four-month high of 53.0 in November from 52.1 in October, while an index based on an official survey rose to 55.3 from 54.7. The increase in the CLSA index, in positive territory above 50 for the 12th month running, reflected gains in output and total new orders.
"Overall, the November manufacturing PMI series seem to indicate that the near-term momentum of the economy's industrial production has likely held steady," Qian Wang, an economist with JPMorgan in Hong Kong, said in a note to clients.
Details though suggested that the solid momentum in exports seen in recent months was likely to moderate somewhat going forward, she said. Both surveys showed weakness in new export orders, reflected in CLSA's sub-index dropping below the break-even line of 50 for the first time since the survey was launched in April 2004, suggesting a clouded outlook for global demand
The anecdotal evidence of export weakness coincided with evidence of a slowdown in the United States and the first contraction in 3 years in business activity in the US Midwest, data released on Thursday in the United States showed. While inventory components in both surveys had remained subdued, the ratios of new orders and new export orders to inventory had dropped for three consecutive months in the official survey, published on behalf of the statistics bureau.
"This trend, if continued, would raise concerns of more significant inventory building especially when end demand slows meaningfully," said Wang.