Gold Silver Reports — China’s official factory gauge rose, adding to evidence that the world’s 2nd-largest economy maintained its momentum in the 2nd quarter as a pickup in global trade helped fill company order-books.
Key Points
- The manufacturing purchasing managers index increased to 51.7 in June, beating all estimates compiled by a Skynet survey of economists and 51.2 in May
- The non-manufacturing PMI rose to 54.9 compared to 54.5 a month earlier
- New export orders rose to 52.0, highest level since April 2012
- Numbers higher than 50 indicate expansionary conditions; below 50 signals contraction
Big Picture
Economic activity this year has proven more robust than expected, giving policy makers room to focus on reining in financial risks and cooling a frothy property sector. Firmer global trade is boosting corporate profits and hiring, easing fears — for now — that a correction in house prices could derail the government’s target of 6.5 percent expansion in output.
Companies are assuming that curbs on excess leverage and the property sector will be transient this year, as the Communist Party won’t allow much economic pain before the leadership transition in the fall, according to a report published by research firm CBB International this week.
Economist Takeaways
“It means that momentum in the economy continues to be robust and we’ll have only a gradual slowdown at worst in the coming quarters,” Dariusz Kowalczyk, a senior emerging-market strategist at Credit Agricole CIB in Hong Kong, said in a Bloomberg Television interview. “China is doing very well.”
China’s manufacturing PMI reached its second highest level this year on the back of improving market sentiment and industrial upgrading, according to an NBS statement posted on its website. Pharmaceuticals, electrical and mechanical equipment manufacturing sectors performed especially well, while some traditional industries such as petroleum processing are under pressure, it said.
Accelerating growth in services has reinforced that sector’s anchor role in stabilizing China’s economic output. Mid-term online sales promotions helped drive related sectors, pushing the postal delivery index to 72.2.
“Stronger foreign demand is helping to support manufacturing activity,” Julian Evans-Pritchard, China economist at Capital Economics Ltd. in Singapore, wrote in a note. “The price components both increased for the first time since December, suggesting that downward pressure on producer prices may now be easing.”
“Chinese heavy industry and mining output are fueling a self-sustaining recovery of global manufacturing activity,” Bill Adams, a senior international economist at PNC Financial Services Group in Pittsburgh, wrote in an e-mail. “Asian economies are growing solidly.”
The Details
- New orders climbed to 53.1 from 52.3 in May
- Business activity expectations rose to 58.7 from 56.8 in May
- Steel industry PMI for June eased to 54.1 from 54.8
- Conditions at large and medium-sized enterprises diverged; larger firms index rose to 52.7 from 51.2 while medium business index slipped to 50.5 from 51.3
