China’s PMI highlights status of global demand for world’s second-largest economy
ALBAWABA – China’s PMI, a primary gauge of factory activity and orders, which is indicative of the overall health and status of the world’s second-largest economy, has taken a surprising turn to the worse in October, news agencies reported Tuesday.
Investors rely on Purchasing Managers Index (PMI) reports from around the world for feelers on how the bigger economies worldwide are faring and where they’re headed in terms of demand.
According to Bloomberg, those wanting to gauge the health of global consumer sentiment should look no further than China’s factories right now.
The official PMI fell to 49.5 in October from 50.2, dipping back below the 50-point level, which separates contraction from expansion, data from the National Bureau of Statistics showed on Tuesday.
China’s overall PMI was way below Reuters’ forecast average of 50.2. Worse even than the most pessimistic prediction of 49.9 by Standard Chartered in a Reuters poll.
China's PMI is a primary gauge of the status of the Chinese economy - Shutterstock
Makers of Christmas decorations to clothing and tents say orders from overseas customers are drying up, according to Bloomberg. Some said the best they can aim for is flat demand, compared to last year, more than a dozen export managers told Bloomberg News.
China’s non-manufacturing PMI also fell to 50.6 last from 51.7 in September, indicating a slowdown in activity in the vast service sector and construction, Reuters reported.
Despite a range of policy measures intended to boost local demand, the protracted property crisis, featuring Evergrande and other smaller real estate developers, along with soft global demand remain major challenges for the Chinese economy.
Export data not as indicative as China’s PMI
Meanwhile, though export data do not reflect the fall in China’s PMI, Bloomberg’s analysts argue the resilience being seen in China’s export data may fade.
The boom in exports was bolstered in part at least by price inflation, delayed orders from the pandemic and forward orders, the New York-based news agency reported.
Export data do not reflect the reality of the economy as does China's PMI - AFP
Weaker exports could add another blow to a Chinese economy that’s already showing signs of slowdown in some aspects.
China’s central bank unexpectedly cut its key interest rates on Monday to ramp up support, as official data showed retail, investment and industrial production numbers for July all missed economists’ estimates, according to Bloomberg.
Domestically as well, China's new home prices fell for a third straight month in September, data reported by Reuters showed.
Notably, September is traditionally peak home buying season, while overall property sales and investment extended double-digit declines. High youth unemployment, elevated debt levels and a weakened yuan are also complicating Beijing's efforts to revive activity.
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