Activity levels across China’s manufacturing sector held steady in June, continuing the theme of recent months.
The latest manufacturing purchasing managers’ index (PMI) released by the National Bureau of Statistics (NBS) came in at 50, a figure that was in line with expectations.
The index measures changes in activity levels from one month to the next. Anything above 50 signals growth, while anything below that level means contraction -— so the higher the number the better.
At 50, activity levels neither improved or deteriorated in June. Exciting, right?
According to the NBS, improved activity levels at larger firms offset weakness in small and medium sized enterprises. The large manufacturers PMI came in at 51.0, significantly above the 49.1 and 47.4 levels reported for medium and smaller sized firms.
Of the major survey inputs, production came in at 52.5, the highest reading seen in a year.
Elsewhere new orders expanded fractionally, coming in at 50.5 from 50.7 reported previously. They have now expanded for four consecutive months. Although total orders grew, those coming from abroad actually fell, slipping to 49.6. It was the first time since February that export orders had contracted.
While the manufacturing print was another non-event, there was some better news for the nation’s services sector which saw activity levels improve from May.
The NBS’ non-manufacturing PMI gauge ticked up to 53.7, an improvement on the 53.1 level of May. It now sits at a three-month high.
Although the manufacturing survey tends to get more attention from the markets, reflecting China’s industrial past, the services gauge is now perhaps of more importance given it is now the largest component of the Chinese economy.
As the chart below reveals, activity levels continue to expand at a fast clip, mirroring the rapid growth in China’s tertiary sector over the same period.
Following the release of the two official PMI surveys from the government, markets now await the release of the Caixin-Markit manufacturing PMI survey for June.
It’s a private sector survey, concentrating on small and medium sized firms from the nation’s private sector. It differs from the NBS PMI report which captures activity levels at firms of all sizes from both the public and private sectors.
Given reliability concerns surrounding official Chinese data, some market participants — whether rightly or wrongly — place more weight on the Caixin-Markit survey.
It will be released at 11.45am AEST.