Chinese PMI slows, but how much?

China’s official manufacturing purchasing managers index (PMI) in July continued to show signs of slowdown, albeit at a moderating pace.  The headline PMI fell from 50.9 to 50.7, better than the expected number of 50.1.

The new orders index increased from 50.8 to 51.1, which is a bit of a good news, while output fell from 53.1 to 52.1.  More good news is that the inventory levels appear to be falling.  Finished goods inventory fell from 51 to 49.2, while input price fell from 56.7 to 56.3.

Source: China Federation of Logistics & Purchasing

These data points paint a more optimistic picture of Chinese manufacturing in July.  Although slowing down, the pace has moderated.  Input prices continue to fall, although at a slower pace as well, and the trend of inventory build-up has reversed from June.  Of course, despite a better than expected reading, the current data is the weakest July since 2008.

Before getting too happy, however, the HSBC China manufacturing PMI headline number is just out, and it is 49.3, which is not only showing continued slowdown, but actual contraction.  Thus, only one thing that is certain is that manufacturing is slowing down, but by how much and how quickly we remain unsure.