I have revised this result twice, as it has returned to contraction again after a good June. This was a major failure to meet expectations.
This is its first contraction in nine months, and points to underlying problems in the Chinese economy. The PMI had performed better than the official PMI, offering a glimmer of hope, but now both are in contraction.
summary:
- Industrial output grew for the ninth straight month, but at a marginal rate.
- Total new orders fell, with consumer goods outperforming investment goods.
- Employment remained steady despite a contracting labor market.
- Input costs have risen, but selling prices have fallen due to competition.
The report concludes that policy focus is essential to stabilizing growth and improving domestic demand. Well, yes. But with China’s massive debt burden, it will be slow.
Official PMI from yesterday:
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There are two main PMI surveys in China – the official PMI released by the National Bureau of Statistics (NBS) and the Caixin China PMI published by media company Caixin and research firm Markit/S&P Global.
- The official PMI survey covers large, state-owned enterprises, while the Caixin PMI survey covers small and medium-sized enterprises. As a result, the Caixin PMI is considered a more reliable indicator of private sector performance in China.
- Another difference between the two surveys is their methodology. The Caixin PMI survey uses a wider sample of companies than the official survey.