The Markit China Manufacturing PMI crossed into positive territory, but barely. This is the first positive reading in operating conditions since February 2015.

July survey data signalled a renewed upturn in operating conditions faced by Chinese manufacturers, with output, new orders and buying activity all returning to growth. However, employment continued to decline and at a solid pace, which in turn contributed to the quickest rise in outstanding business since March 2011. Meanwhile, increased prices for raw materials led to a marked rise in average input costs, which companies generally passed on to clients in the form of higher output charges.

Key Points

• Renewed expansions in output, new orders and purchasing activity
• Payrolls cut again and a solid rise in backlogs of work was recorded
• Marked increases in input costs and output charges

Comment

Commenting on the China General Manufacturing PMI™ data, Dr. Zhengsheng Zhong, Director of Macroeconomic Analysis at CEBM Group said:

“The Caixin China General Manufacturing PMI came in at 50.6 for July, up significantly by 2.0 points from the reading for June, marking the first expansion since February 2015. The sub-indexes of output, new orders and inventory all surged past the neutral 50-point level that separates growth from decline. This indicates that the Chinese economy has begun to show signs of stabilizing due to the gradual implementation of proactive fiscal policy. But the pressure on economic growth remains, and supportive fiscal and monetary policies must be continued.”

China PMI

Comment on the Comment

There were signs of stabilization in 2015, 2014, 2013, and 2012. So let’s not get excited over a one month expansion that is barely positive.

Where this all heads is more likely to depend on the global economy than internal demand in China. Export demand is as likely to weaken as anything else.

A global trade war may be on the horizon regardless of who wins the US election in November.

Mike “Mish” Shedlock