MORE EVIDENCE THAT China’s economy is fitfully grinding out recovery from the ravages of Covid-19 comes from Caixin’s manufacturing purchasing managers’ index (PMI) for August.
This hit 53.1, up from 52.8 in July and was the fourth consecutive month of expansion. Readings above 50 signal growth.
Caixin’s index is more weighted to private sector manufacturing than the official index, whose August reading showed the pace of expansion levelling off from July, perhaps because of flood-disruption in western parts of the country. Non-manufacturing remains strong, however, with the official services PMI rising to 55.2 from July’s 54.2.
Caixin’s August number is in line with other data showing rising manufacturing exports and employment. Stimulus measures to offset the impact of Covid-19, equivalent to about 4% of GDP, are working through the economy, though they are investment-led, rather than directly supporting consumption. The policy drives for import substitution and technological self-sufficiency look to be kicking in, too.
Growth for the year of around 2% looks achievable, which would make China the only large economy to grow this year. Still, it is hard to escape the conclusion that for now demand still lags supply, and will do so until domestic small business gets back onto a sound footing, stimulus measures start to boost consumer sentiment and household spending, and economies around the world recover their strength, which looks the most distant prospect of the three.