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Last Tuesday, the results of a private survey presented China’s manufacturing activity expanded for August. The results showed that it was at its fastest pace in nearly ten years. The Caixin/Markit manufacturing Purchasing Managers’ Index (PMI) reached 53.1 for August, compared to 52.8 in July.
Economists polled by Reuters had expected Caixin/Markit manufacturing PMI to reach 52.7. While PMI readings above 50 mean expansion, those below that level mean contraction. The said readings are sequential and determine the on-month expansion or contraction.
According to Caixin and IHS Markit’s joint report, August’s expansion was the fastest since January 2011.
“Manufacturing demand and supply continued to recover, and overseas demand started to pick up.”Wang Zhe, senior economist at Caixin Insight Group
In August, “the subindices for output and total new orders again hit their highest levels since January 2011,” the report indicated. The gauge for fresh export orders also had expansionary territory for the first time this year, as the pandemic outbreak slowed overseas, mentioned Wang.
China had to experience the coronavirus’s effects as it was where the virus was first detected. China’s manufacturing sector experienced a loss as factories had to shut earlier this 2020 due to the pandemic that caused large-scale lockdowns. The lockdowns were necessary to decrease the spread of the coronavirus. The manufacturing sector had to oblige to the government’s orders to contain the spread of the disease.
The demand globally was also hit as the virus continue to spread locally and internationally. However, recent data presents signs of China’s economy undergoing fast recovery from the pandemic. Last Monday, China’s National Bureau of Statistics reported that August’s official manufacturing PMI record came in at 51.0. The said record was close enough to the expectations of analysts that were a 51.2 reading.
According to Helen Qiao, chief Greater China economist at Bank of America Securities, the boost in manufacturing activity is most likely due to the substantial investments in real estate and infrastructure projects. The expansion in export orders in August most likely also indicates that consumer demand is recovering well, Qiao added.
The official PMI survey typically conducts polls for a large proportion of big businesses and state-owned companies. In comparison, the private Caixin and IHS Markit survey presents a more extensive mix of small- and medium-sized firms.