China Caixin Manufacturing PMI Hits 51 Despite Weak Overseas Demand

Highlights

• The China Caixin Manufacturing PMI surprises to the upside, rising to 51.0 in August.
• Despite the upbeat headline number, overseas demand continued to wane.
• The US Jobs Report is up next.

China Caixin Manufacturing PMI Impresses

The Caixin Manufacturing PMI increased from 49.2 to 51.0 in August. Economists forecast the PMI to rise to 49.3.

According to the August survey,

• Market conditions supported an increase in new domestic orders.
• However, new orders from overseas continued to fall, albeit at a less marked pace.
• The upswing in new orders led to a pickup in production, though firms remained cautious about stockpiling.
• Nonetheless, manufacturers increased staff levels on expansion plans. The rate of job creation was the most marked since March 2010.
• Rising prices for raw materials pushed input prices higher for the first time since February.
• Despite the upswing in input prices, firms reduced output prices amidst increased competition for new business.
• Optimism across the manufacturing sector deteriorated in August, with sentiment declining to an 11-month low.

While the return to growth was positive, weakness in overseas demand remains a concern. The Chinese economy will need more than domestic demand to support an economic recovery.

AUD/USD Reaction to the China Caixin Manufacturing PMI

Before the China Caixin Manufacturing PMI Report, the AUD/USD fell to a low of $0.64739 before striking a pre-stat high of $0.64999.

However, in response to the Caixin survey, the AUD to USD rose to a post-stat high of $0.64917 before falling to a low of $0.64814.

This morning, the Aussie Dollar was up 0.01% to $0.64850.

Up Next

The US Jobs Report will be in the spotlight this afternoon. With the markets divided on Fed interest rate goals, US wage growth and unemployment figures could refuel bets on a final rate hike.

Economists forecast average hourly earnings to increase by 4.4% year-over-year in July. Despite the disappointing ADP and JOLTs numbers, economists expect a US unemployment rate of 3.5%.

ISM Manufacturing and finalized S&P Global Manufacturing PMIs will also draw interest. Investors will likely consider any data points that can influence Fed monetary policy bets.