International | Feb 04 2009
By
Rudi Filapek-Vandyck
A
picture seems to be emerging that China's manufacturing sector might
have hit rock bottom in November last year, and that a slow and gradual
recovery is taking place on the back of increased government stimuli.
After CLSA's monthly survey into Chinese manufacturers
showed a slight improvement for January on Monday, today's release of
the official manufacturing activity survey suggests a slow recovery might indeed
be taking place.
It
has to be noted though, the sector is still contracting and has been contracting
for four months in a row, if we take guidance from the monthly Purchasing
Managers' Index for China's manufacturing sector as compiled
and published by the China Federation of Logistics and Purchasing and the
Chinese government's& National Bureau of Statistics.
According to the official January PMI release, the
Purchasing Managers' Index for China’s manufacturing sector rose to 45.3% from
41.2% in December and a record low of 38.8% in November. A reading
below 50% indicates contraction.
Also, a measure of export orders rose to
33.7 from 30.7 in December. The output index jumped to 45.5 from 39.4. The
new-order index climbed to 45 from 37.3. The measure of unemployment, however,
dropped to 43.0 from 43.3. In November, those indexes all fell to the lowest
levels since the survey began in 2005.
Further fueling hope the Chinese economy may have left
the worst behind, is a report by Bloomberg that a survey of 500 Chinese firms
in 60 cities in December and early January by Nomura Holdings has revealed
60% had cut inventories to one or two months’ use or sales, down from
three to four months.
The Nomura survey indicates Chinese companies may start
rebuilding their inventories later this quarter. This could boost demand for
beaten down base materials.
The
PMI is based on a survey of more than 700 companies in 20 industries,
including energy, metallurgy, textiles, automobiles and electronics.The
survey tracks changes in output, new orders, export orders, employment,
inventories, input costs and output prices.