For the first time in four months, China’s official manufacturing purchasing managers’ index and the HSBC China Manufacturing PMI compiled by Markit are both signaling expansion of the sector in the world’s second-largest economy. The HSBC/Markit manufacturing PMI rose to 50.1 in August from 47.7 in July, according to the latest report released Monday at 9:45 a.m. CST (Sunday at 9:45 p.m. EDT).
The competing Chinese manufacturing PMI reports for May, June and July had painted different pictures of the sector, with the official report showing expansion and the HSBC-Markit report showing contraction.
The HSBC/Markit manufacturing PMI for last month is consistent with the previously released HSBC Flash China Manufacturing PMI, which was 50.1 on Aug. 22.
Hongbin Qu, HSBC’s chief economist for China and co-head of Asian economic research, addressed reasons for the resurgence of the sector in the report released Monday: “The final reading of August’s HSBC China Manufacturing PMI recovered to 50.1, from an 11-month low of 47.7 in July. This implies that growth in China’s manufacturing sector has started to stabilize on the back of a modest rebound of new orders and output. This was mainly driven by the initial filtering-through of recent stimulus measures and companies’ restocking activities. We expect some upside surprises to China’s growth in the coming months.”
The HSBC/Markit manufacturing PMI is a composite index based on five subindexes with the following weights: new orders, 30 percent; output, 25 percent; employment, 20 percent; suppliers’ delivery times, 15 percent; and stock of items purchased, 10 percent. (N.B.: The suppliers’ delivery times subindex is inverted so it moves in a comparable direction.)
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The HSBC/Markit manufacturing PMI has ranged this year between a high level of 52.3 in January and a low level of 47.7 in July. A reading above 50 indicates the sector is expanding, while a reading below 50 suggests the sector is contracting.