China Caixin Manufacturing PMI Climbs to 50.4 on Strong Domestic Demand

China Caixin Manufacturing PMI Edges Higher

On Monday, September 2, the Chinese economy was in focus, with the Caixin Manufacturing PMI drawing investor interest. The crucial Caixin Manufacturing PMI increased from 49.8 in July to 50.4 in August.

August’s survey revealed key insights:

• New orders returned to growth, driving production midway through Q3 2024.
• Manufacturers stated that improving underlying demand conditions and promotional efforts fueled new orders.
• However, export orders remained subdued, falling for the first time in 2024, reflecting weakening external demand conditions.
• Higher domestic demand gave much-needed support to the labor market, which ended an 11-month decline in staffing levels.
• Average input costs declined for the first time in five months, attributable to lower commodity prices.
• Manufacturers cut selling prices to further boost demand.
• Optimism reached a three-month high, indicating growing confidence.

Contrastingly, the NBS PMI numbers from the weekend painted a different picture. The NBS Manufacturing PMI fell from 49.4 in July to 49.1 in August. Despite the weaker reading, market risk sentiment remained largely unaffected, with economists expecting a rebound in September.

August Survey Takeaways

The upward trend in the Caixin Manufacturing PMI bodes well for the Chinese economy amid evidence of strong domestic demand. However, the August survey highlighted subdued global demand, which could affect China’s manufacturing output trends toward year-end.

The Market Reaction to the Caixin Manufacturing PMI

Despite the better-than-expected PMI, the Hang Seng Index fell by 1.31%. The PMI data provided no support to the market, with the Hang Seng Index trending lower before the PMI release.

The Aussie dollar was also on the back foot on Monday. Before the Caixin Manufacturing PMI survey, the AUD/USD fell to a Monday morning low of $0.67617 before climbing to a high of $0.67785.

However, in response to the PMI survey, the AUD/USD rose to a post-release high of $0.67732 before falling to a low of $0.67672.

Expert Opinions on China’s Economy

Caixin Insight Group Senior Economist Dr. Wang Zhe remarked on the August Caixin Manufacturing PMI data, stating,

“Data released recently on industrial production, consumption, and investment showed that although the economy has continued the trend of stabilization seen in the second quarter, it is significantly weaker than market expectations. […] Considering the government’s ambitious annual economic growth target, the challenges and difficulties in stabilizing growth over the coming months will be substantial.”

CN Wire, an FICC Investor, researcher, and energy observer, covering China’s business and market, commented,

“In September, steel market demand is expected to rebound. As the impact of high temperatures and heavy rains across various regions gradually diminishes, the steel industry is approaching its traditional peak season, providing a solid foundation for the recovery of downstream demand.”