China: Manufacturing PMI Rises

Feb. 03, 2019 9:23 AM ET3 Likes


  • Headline up, but forward indicators bleak.
  • Is the stimulus getting where it should?

By Robert Carnell, Chief Economist Head of Research, Asia-Pacific

China's PMI headline index rose in January to 49.5 from 49.4, but the detailed message from the components is not so reassuring

Headline up, but forward indicators bleak

The vast majority of forecasters including ourselves anticipated a decline in this PMI index this month, so what is going on? At a component level, the output index did increase by 0.1pp, and stands at a modest 50.9, consistent with very slow, but positive growth. But the decline in the supplier delivery time index to 50.1 from 50.4 is more consistent with weakness than a pick up in activity. Inventories also rose, which will have fed through to the headline increase, But this is in all likelihood a reflection of stocking-up ahead of tariff concerns. It probably shouldn't be read positively. it may have to be unwound in the months ahead.

Moreover, forward-looking indicators of Chinese manufacturing strength, such as new orders, fell slightly again to 49.6, indicating outright shrinkage at these levels.

Is the stimulus getting where it should?

Moreover, when viewed by size of firm, there is a clear split between large enterprises, and everyone else. Large firms showed a pick up from 50.1 to 51.3. They are probably the easiest for banks to support with recent monetary stimulus measures. But the additional effort of getting loans out to small and medium-sized firms shows in outright falls in the indices for these firms at levels well below the 50 break-even level.

Tomorrow's Caixin PMI, which has a greater private sector focus than these official PMIs will probably show a similar discrepancy. Our Greater China Economist, Iris Pang, sees the Caixin Manufacturing PMI index falling to 49.2 from 49.7.

Better news for the non-Mfg sector

The non-manufacturing sector fared better according to these latest data. The headline non-Mfg PMI index rose to a respectable 54.7 from 53.8, helping lift the composite index to 53.2. New orders rose to 51.0 from 50.4. But while some other component indices also rose, like employment, export orders, backlogs of work and inventories, they remained below 50, suggesting merely that the rate of actual decline in these areas was lessening, but has not yet reversed.

Content Disclaimer

This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more.

Original Post

Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors.

This article was written by

From Trump to trade, FX to Brexit, ING’s global economists have it covered. Go to to stay a step ahead. We’re sorry we can’t reply to individuals' comments.Content disclaimer: The information in the publication is not an investment recommendation and it is not investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument.This publication has been prepared by ING solely for information purposes without regard to any particular user's investment objectives, financial situation, or means. For our full disclaimer please click here.
To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.