China’s big factories ran at their slowest pace in almost three years in October as new orders and exports slowed, but smaller firms are showing signs of a fight back against a deteriorating global backdrop, purchasing managers indexes showed on Tuesday.
China’s official PMI recorded its lowest reading since February 2009, coming in at 50.4 for October compared with September’s 51.2, according to the China Federation of Logistics and Purchasing (CFLP) which compiles the index on behalf of the National Bureau of Statistics.
The reading confounded market expectations of a third straight month of rising activity and a forecast of 51.6.
A separate PMI, compiled by UK-based private sector data specialist Markit in conjunction with HSBC, came in at 51.0 — just below the 51.1 level in last week’s flash release — a solid rebound from the 49.9 recorded in September to mark the first rise above the 50 level that demarcates contraction from expansion since June.
It’s not unusual for the two indexes to deliver divergent results as economists say China’s official PMI gathers more data from the country’s biggest manufacturers, while the HSBC index focuses on the small and medium-sized enterprises that provide around 75 percent of the jobs in China…
“The fall of PMI in October points to further economic slowdown in the future,” Zhang Liqun, a researcher with the Development Research Centre of the State Council, wrote in the CFLP statement.
But Zhang Zhiwei, chief China economist at Nomura Securities, said seasonal factors could be behind the lurch lower for the official index, pointing out that on average the October PMI came in 0.9 index points below September’s.
“Given the drop of the PMI is mostly driven by seasonality rather than economic weakness, we maintain our view that reserve rate requirements and interest rates will remain unchanged for the rest of 2011,” Zhang wrote in a client note.
Export Orders Drop
The official PMI recorded falls across key component parts with new orders, which make up 30 percent of the index, slipping to 50.5 from 51.3 and production — another 25 percent of the headline number — easing to 52.3 from 52.7.
New export orders dropped to 48.6 from 50.9.The National Bureau of Statistics (NBS) said in a statement on its website that the weak reading of the October PMI showed that China is feeling the effects of sluggish demand from European and U.S. economies
Interesting official PMI was less than the HSBC PMI, which was also released today. Are they paving the
way data for an easing of monetary policy or to justify contributing to the Eurozone bailout? Just askin’.