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China Economy Starts to Stabilize & Rebound, Manufacturing Index Shows
Sep 1,2011 11:49CST
smm insight
Source:SMM
SMM maintains the stabilizing and rebounding trend judgment for China economy following a comprehensive consideration of industrial data and PMI in recent months as well as other economic factors.

SHANGHAI, Sept. 1 (SMM) -- The Purchasing Managers’ Index in August was at 50.9, compared with 50.7 in July, the China Federation of Logistics and Purchasing (CFLP) said in a statement today. A reading above 50 indicates an expansion, and this data shows China’s manufacturing activities have slightly improved.

In details, a more than 2% decline was reported in new export order index, while new order index was little changed. Less than 1% declines were seen for goods inventory index, purchase volume index, employments number index and supplier delivery time index. Remaining indexes have reported gains, with higher than 1% gains reported for order backlog index and raw materials stock index.

The Purchasing Price Index (PPI) rebounded to 57.2% in August with a 0.9% gain. Among the 20 industries covered, PPIes less than 50% were only seen in the paper making, printing, education & sports products industry, nonferrous metals smelting, rolling & processing industry as well as textile industry. PPIs of remaining industries are above 50%, and were higher than 60% in seven industries including agricultural & non-staple food processing and food production industry, beverage production industry and non-metallic mineral products industry.

Based on the products produced, PPIs among producers of raw materials, energy, intermediate products, consumable goods and production-needed finished goods were higher than 50%, and were higher than 60% among raw materials and energy type enterprises. This indicates higher production cost among the enterprises involved.

Nevertheless, SMM maintains the stabilizing and rebounding trend judgment for China economy following a comprehensive consideration of industrial data and PMI in recent months as well as other economic factors. Though previous HSBC China PMI was weak, and the CFLP PMI also shows a deteriorating trend among medium sized enterprises, overall impact on China economy is relatively limited as fixed asset investment, real estate investment and industrial output have not been significantly influenced. And after inflation pressure alleviates during 2H, associated capital pressure will also get a relief, thereby reducing worries towards medium-to-small sized enterprises in the market. SMM expect China’s manufacturing activities to rebound and performance at medium-to-small sized enterprises will also improve, which will in turn contribute to consumption and economic growth.

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