The just released official manufacturing purchasing mangers index (PMI) for China shows a small rebound in August. The headline PMI rose from 50.7 in July to 50.9 in August, just slightly below market expectation of 51.1.
The new orders index was flat at 51.1, and output rose from 52.1 to 52.3. Raw materials inventory rose from 47.6 to 48.8, while finished goods inventory fell from 49.2 to 48.9, which are both good signs as they are below 50, indicating there is less pressure of inventory build-up.
Input prices, however, rose from 56.3 to 57.2 after falling for the most part of this year, highlighting the fact that inflation is far from under control. Another point worth noting is that new exports orders fell from 50.4 to 48.3, the first time since the recovery from the financial crisis in 2008. This highlights the difficult situation in the global macro environment, while at the same time pointing to relatively robust domestic economy.
As you can see, the August reading is the weakest since 2008 and second only to 2008:
This set of numbers is relatively neutral, there are some good bits as well as bad bits in the data. On one hand, you have the data which shows the domestic economy holding up, but on the other hand you have clear signs of weak external demand. While the global economic slowdown is underway, you have inflationary pressure clearly not going away, which points to a lower probability of monetary easing.
Meanwhile, the HSBC/Market China manufacturing PMI headline figure was 49.9, rebounding from 49.3 in July, but still below 50, indicating a manufacturing contraction. On the whole, this is subdued news.