China’s official PMIs improved in October, probably as a first sign that policy stimulus is having an impact on the economy. Recent measures may take time to filter through to the economy. Also, more details will likely be released during the upcoming meeting of top Chinese policymakers on November 4-8, Commerzbank’s Senior Economist Tommy Wu notes.
All eyes are on the upcoming government meeting
“The official manufacturing PMI rose to 50.1 in October, up from 49.8 in September and after it stayed below the 50-neutral mark for five consecutive months. Among the components, production was firmer inside the expansion territory. New orders rose to 50 after indicating a contraction for five months. This reflects an improvement in domestic demand, likely bolstered by the recent policy stimulus. There are also signs that producer prices may start to stabilize, in month-on-month terms. The subindex on factory gate prices rose to 49.9, just below the 50-neutral mark, while prices of raw material inputs rose above 50 to 53.4.”
“Meanwhile, the non-manufacturing PMI rose to 50.2 in October from 50 in September. This was supported by an improvement in services, in which the subindex rose to 50.1, up from 49.9 below the 50-neutral mark previously. This may be in part due to the seasonal effect of the one-week National Day holiday in early October. The government’s trade-in program that supports the sales of cars and big-ticket items may also have a role to play.”
“All eyes are on the upcoming government meeting on November 4-8, in which the Standing Committee of National People’s Congress will discuss and approve economic and financial policies. The meeting is expected to fill in the details of policy measures previously announced. These include stimulus and measures that support consumption, the property sector, and local government financing.”
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