International | Sep 01 2010
By Rudi Filapek-Vandyck
HSBC reports its seasonally adjusted headline HSBC China Manufacturing Purchasing Managers’ Index rose to a three-month high of 51.9 in August, pointing to a moderate improvement in Chinese manufacturing sector operating conditions. The August improvement follows a slight deterioration in the preceding month.
Nonetheless, say HSBC economists, the index is still almost six points lower than the series-record high registered at the start of the year.
Earlier today, the China Federation of Logistics and Purchasing (CFLP) reported China's official purchasing managers' index (PMI) rose to 51.7 in August from 51.2 in July. According to news service Reuters, the official reading compared with the median forecast of 51.8 prior to the release. Also, notes Reuters, August marks the 18th straight month that the official PMI has stood above the threshold of 50 that demarcates expansion from contraction.
The non-official (private) index published by HSBC and Markit Economics dipped into contractionary territory (below 50) last month, but has now bounced back into slight expansion again. According to HSBC, where an increase in output was signalled in August, respondents commonly linked growth to greater inflows of new business, which rose for the first time in three months during August. The rate of new business growth was moderate, but slower than the long-run series average.
Anecdotal evidence suggested that new business wins reflected stronger market demand and the success of promotional campaigns, say the economists. They also highlight the overall rise in new work centred on the domestic market, with new export business falling slightly for a third month in succession.
Manufacturing employment in China rose again during August, largely as a result of new business gains and increased graduate recruitment, reports HSBC. The economists highlight the rate of job creation was only marginal, and the joint slowest since June 2009. Lacklustre employment growth primarily reflected the voluntary departure of staff, with retirement and resignations due to low salary payments commonly cited by panellists.
Latest data indicated that average input costs faced by Chinese manufacturing firms increased in August, following two successive monthly reductions. The rate of input price inflation was marked, but slower than the long-run series average. Prices paid for steel (on domestic markets) and grain (on international markets) were reported as having risen on the month.
Reflecting a combination of higher raw material prices and stronger client demand, manufacturers reported raising their output prices for the first time in three months during August. However, the pace of output price inflation was relatively subdued.
HSBC expects external demand to turn worse in the months ahead but that GDP growth will remain around 9% due to a fairly resilient domestic economy in China.
