International | Jul 01 2009
By Rudi Filapek-Vandyck
CLSA reports its China Manufacturing PMI rose to 51.8, from 51.2 in the previous month. As such, the June reading for the index does not only represent the highest level since July 2008 but CLSA economists highlight the June industry survey also proved indicative of a rise in international orders, contributing to a modest improvement in overall operating conditions.
Earlier this morning, the Federation of Logistics and Purchasing announced its Purchasing Managers’ Index rose to a seasonally adjusted 53.2 in June from 53.1 in May (see earlier story on the FNArena website).
CLSA reports production levels at Chinese manufacturers increased for the third successive month in June, largely reflecting gains in new business and an improvement in economic sentiment. Output growth was recorded as “solid”; it was the strongest for a year.
Underlying the improved performance of the manufacturing sector, highlights CLSA, was a solid and accelerated rise in total new order levels. If we take guidance from CLA’s monthly survey (as opposed to the one conducted by Federation of Logistics and Purchasing) then June marks the third straight month in which firms’ order books have improved. This succession of improving conditions was preceded by eight months of contraction.
CLSA reports of those firms reporting a rise in new work, the majority linked this to increased client confidence and new product developments. June data indicated that foreign orders rose for the first time in eleven months. CLSA economists are quick in adding the expansion was only marginal, so demand from domestic sources remains the primary driver of total new business growth in June.
Manufacturing employment posted a marginal rise in June, following stagnation in the previous month. CLSA points out there were widespread reports throughout the month that rising output requirements and new order volumes had encouraged firms to take on additional workers.
Factory gate prices, however, fell for the tenth successive month in June, although CLSA economists point out the latest decline in prices was the least marked in that sequence. Input costs faced by Chinese manufacturers declined for the ninth month running in June, with a number of respondents reporting that falling raw material prices had suppressed costs. Equally so, points out CLSA, the latest reduction in input costs was only marginal with some firms signalling that higher prices for petroleum-related products had placed pressure on their cost burdens.
In addition to all of the above, Eric Fishwick, Head of Economic Research at CLSA, remarks the monthly survey raised one small issue: “Finished goods inventories increased. The rise is moderate but is unusual for China and in some industries inventory accumulation anecdotally has been much more aggressive.”