- China’s manufacturing PMIs still below 50 but stabilising, while divergence in Services PMIs widens
- US manufacturing at slowest pace in two years
- Slowdown in eurozone manufacturing limited by robust domestic demand
Chinese Manufacturing PMIs still below 50, but stabilising
China’s PMI data for September published on Thursday showed a mixed picture. Caixin’s Manufacturing PMI came in at 47.2, a touch better than the flash number (and consensus forecast) of 47 and just below the August reading of 47.3. Still, this index is at its lowest level since March 2009, confirming the weakness in China’s industry, which is faced with overcapacity and subdued domestic and external demand. In contrast, NBS’ Manufacturing PMI rose marginally to 49.8 (consensus 49.7, in line with the August figure). The NBS index includes the larger (state) enterprises that more directly feel the support of the government’s general easing measures.
Caixin’s Services PMI at 14-month low, NBS’s solid at 53.4
Caixin’s Services PMI fell to a 14-month low of 50.5 (August: 51.5), although remaining above the neutral 50 mark. Still, the employment sub-index improved, illustrating the strength of the services sector in creating jobs. However, Caixin’s composite output index reached the lowest level since 2009. Meanwhile, NBS’ non-manufacturing PMI was more resilient, staying at a solid 53.4. All in all, while services continue to hold better than industry, there is a risk that the weakness broadens. We still expect the government to add monetary and fiscal stimulus to keep China’s slowdown gradual. The government has for instance just halved the sales tax on small cars.
US manufacturing at slowest pace in two years
September’s US manufacturing expanded at the slowest pace in two years. The ISM declined to 50.2 from 51.1 in August. This confirms the tepid growth of a sector that is being severely hit by a strong dollar and the negative impact from declining investments in the energy and mining sectors. Indeed the weakness was widespread. Forward looking indicators, including new orders decreased by 1.6ppts from 51.7 in August. The uncertainty in the global economy, maintained new export orders unchanged at 46.5. Meanwhile, the employment index fell to 50.5 from 51.2 the previous month. Most manufacturing related data has been pointing to weakness, in contrast to the other US economic data which remains strong. We think that US manufacturing activity will remain subdued in the coming time.
Eurozone manufacturing also slowing down
The final estimate of eurozone manufacturing PMI was unchanged from the flash estimate; a decline to 52.0 in September from 52.3 in August. Although at its current level the PMI is still consistent with expansion of the industrial sector, it suggest the sector has lost some momentum. Indeed, the details of the report reveal that the new export orders component fell in September (to 52.1, down from 52.6 ), while the orders-to-stocks ratio edged lower to 1.08 from 1.10. That said, the eurozone’s industrial sector is being supported by the weak euro and the strength of domestic demand, which is compensating part of the slowdown in foreign demand. Indeed, the total orders component fell only marginally in September, despite the decline in export orders. The same picture was painted by Germany’s factory orders for August, which were published earlier. Total orders fell by 1.4% mom, with domestic orders rising by 4.1%, orders from other eurozone countries rising by 2.2% and orders from the rest of the world dropping by 9.5%.