China - Mixed signals from September PMIs

China Macro: Both manufacturing PMIs above the neutral mark again

China’s PMIs for September published last weekend – at the start of the National Day Golden Week – provided mixed signals regarding the state of the economy. Whereas the official PMIs published by NBS on Saturday came in better than consensus expectations and pointed to improvement compared to August, Caixin’s PMIs published on Sunday showed the opposite picture. The PMI survey from NBS is larger than Caixin’s one (samples of around 3200 and 650 firms, respectively), and has a stronger focus on the larger state-owned firms, whereas Caixin’s survey focuses more on private and export-oriented firms.

On the industry side, the official manufacturing PMI rose to 50.2 (August: 49.7, consensus: 50.1), the first time since March this index came in above the neutral 50 mark separating expansion from contraction. Meanwhile, Caixin’s manufacturing PMI dropped back to 50.6 (August: 51.0, consensus: 51.2), although remaining above the neutral mark. Looking at the various subcomponents, the supply side is still doing better than the demand side. That said, the subindices for domestic orders also remain in expansion mode, whereas the export orders’ components improved but remained below the neutral mark. All in all, both the official and Caixin’s PMIs signal a stabilisation of China’s manufacturing sector over the past few months.

Caixin’s services PMI weaker than expected

The biggest disappointment came from Caixin’s services PMI, which fell to a a nine month low of 50.2 (August: 51.8, consensus: 52.0). By contrast, the official non-manufacturing PMI rose to a three-month high of 51.7 (August: 51.0, consensus: 51.6). As a result, Caixin’s composite PMI (a weighted average of the output indices for manufacturing and services) fell to a nine-month low of 50.9 (August: 51.7), while the official compose PMI rose to a three-month high of 52.0 (August: 51.3). All in all, we think the September PMI data are in line with our view that sequential (qoq) growth is bottom outing out following a weak Q2, on the back of ongoing piecemeai monetary easing and the rolling-out of targeted support, particularly for the property sector.