China’s official PMI falls

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Courtesy of Also Sprach Analyst.

Saturday’s official Chinese manufacturing PMI points to further weakening of China’s manufacturing sector falling below 50 for August to 49.2, a nine-month low, and below market estimate of 50.

New orders fell slightly from 49 to 48.7, while new export orders remained unchanged at 46.6. Finished goods inventory increased slightly from 48 to 48.2, while raw material inventory fell sharply from 48.5 to 45.1. The resulting new orders less inventory measure fell slightly from 1.0 to 0.5. Meanwhile, the input prices component rebounded from 41 to 46.1, and employment fell further from 49.5 to 49.1.

Due to seasonality of the official PMI, August is historically a strong month. Excluding this year’s August, the headline PMI figures rose by 0.61 on average in the past compared with July’s. Thus this year’s fall of headline PMI represents a sharper weakening if the series has been properly adjusted for seasonality.

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And as a reminder, HSBC/Markit flash PMI hits a nine-month low of 47.8, although it has been below 50 for 10 consecutive months.

The chart below illustrates the seasonality of official PMI numbers for each year on separate lines:

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The chart below shows the difference between the official and HSBC/Markit PMIs:

The chart below compares the new orders minus inventory measures of the official PMI and HSBC/Markit PMI. While HSBC/Markit PMI shows that this measure has plunged, the official one is holding up so far.

This is a weak report. It confirms my view that the Chinese economy is not bottoming yet.