China Caixin Manufacturing PMI Slides to 49.3 in September

China Caixin Manufacturing Slides to 49.3

On Monday, September 30, investor focus returned to the Chinese economy, with private sector PMI numbers under scrutiny. Both, the NBS and Caixin private sector PMIs provided insights into the economy at the end of the third quarter.

The all-important Caixin Manufacturing PMI slid from 50.4 in August to 49.3 in September, marking a return to contraction. According to the September Survey,

• Manufacturing sector activity saw its sharpest decline since July 2023.
• Manufacturers reported a renewed fall in new orders, which fell at the fastest pace since September 2022.
• New export orders also declined.
• Falling orders led to the first fall in the volume of unfinished work since February 2024.
• Manufacturers reduced headcounts amid cost concerns and the current pullback in demand.
• Input prices declined alongside falling orders, with firms also reducing factory gate prices amidst an increasingly competitive environment.
• Confidence across manufacturing firms fell to the second lowest level since records began in April 2012.

Key Takeaways from the September Survey

The unexpected contraction across China’s manufacturing sector emphasized the need for government stimulus and central bank policy measures to bolster the economy.

Last week, the People’s Bank of China and the Politburo announced measures to support the ailing Chinese economy. Expectations of a boost in consumption limited the impact of the September PMI numbers on market risk sentiment.

Investors will need to assess the effectiveness of the latest policy measures in economic indicators for Q4 2024.

Expert Views on China’s Manufacturing Sector

Dr. Wang Zhe, Senior Economist at Caixin Insight Group, commented on the September Survey, stating,

“Across the board, the latest macroeconomic data have fallen short of market expectations. The issue of insufficient effective domestic demand remains prominent, with significant pressure on employment and weak optimism constraining people’s willingness and ability to spend.”

Dr. Zhe also remarked on the recent policy measures to bolster the Chinese economy, saying,

“On the policy front, measures currently in the works should be sped up to take effect sooner, while the need for additional policies has only grown more urgent. Currently, there is relatively sufficient policy space. Fiscal and monetary policies should play a greater role in safeguarding people’s livelihoods, improving the job market and stimulating demand.”

The Market Reaction to the Caixin Manufacturing PMI

Despite the weaker-than-expected PMI, the Hang Seng Index was up 1.57% to 20,966.

In the forex market, the AUD/USD climbed to a Monday morning high of $0.69364. However, the AUD/USD reacted to the private sector PMIs, falling to a post-stat low of $0.69139.