Chinese official manufacturing PMI numbers for the month of June positively surprised today, in a sign that the world’s second largest economy remains resilient against threats on growth, such as high debt levels in the economy.
Delving into the numbers, the June manufacturing PMI came in at 51.7, beating expectations for a reading of 51.0 and exceeding May’s 51.2. The official PMI figure for the services sector was released at 54.9, comfortably above the 50 threshold that separates expansion from contraction in the sector, as well as above May’s 54.5.
Manufacturing PMI data are typically the ones attracting most attention, though with the rebalancing in the Chinese economy in recent years and household spending making up a greater portion of the economic pie, services PMI numbers are also becoming important for investors.
Looking at the details underpinning the figures, those suggest that the manufacturing sector was supported by demand from abroad as export orders strongly increased, while there are signs for a pickup in household demand as well. On the negative side, traditional sectors, such as crude oil and chemicals, did not manage to reverse the downtrend they’ve entered.
Turning to the forex market’s reaction, dollar/yuan declined on the data, eventually falling to 6.758 which constitutes a three-week low for the pair. It traded at 6.791 before the data became public. The pair later recovered a significant part of its losses but was still last down on the day, looking set to record its fourth straight day of declines.
To conclude, it should be noted that the June Caixin manufacturing PMI will be released on Monday. This report covers private companies, as opposed to the official figures which largely focus on big and often state-owned enterprises. The release of the Caixin report will give a clearer picture of the state of the manufacturing sector. The Chinese economy grew by 6.9% on an annual basis during the first quarter of the year. The government’s target for the year is at 6.5%
