China manufacturing PMI hits three-year low in August
The 'official' Chinese manufacturing sector purchasing managers´ index fell to a three-year low in August, at 49.7, in line with market expectations, following a print of 50 in the month before.
Weak data on China´s services sector triggered losses across Asia overnight, although the latest survey figures on the country´s manufacturing sector were as expected.
The Caixin Chinese services sector purchasing managers´ index for August fell to a reading of 51.5 after a print of 53.8 for the month before. That led some observers to muse aloud about whether the services side of the economy would really be able to make up for the slack in manufacturing.
The 'official' Chinese manufacturing sector purchasing managers´ index plumbed a three-year low in August, to 49.7, as expected by the consensus, following a print of 50 in the month before.
In parallel, at 47.3 the Caixin China manufacturing PMI hit its lowest level since March 2009, as expected, signalling a sixth straight month of contraction.
Combined, the two PMIs from Caixin dragged the so-called composite PMI down by 1.4 points to 48.8 - the first sub-50 reading for this year.
Commenting on the above figures, Julian Evans-Pritchard, China economist at Capital Economics, said: "We don’t think the [manufacturing sector] readings are cause for alarm. For one, China’s economy is increasingly driven by service sector activity, which still appears healthy despite a fall.
"We suspect the latest bout of weakness mostly reflects temporary disruptions to factory output due to restrictions on polluting activities ahead of this week’s Victory Day parade in Beijing rather than a deterioration in underlying economic momentum."
A similar behaviour was observed in the PMIs last year, ahead of the APEC summit, and in the run-up to the 2008 Olympics - when similar efforts were made to ensure blue skies, Evans-Pritchard explained.
In reaction to the above, the Shanghai Stock Exchange Composite Index slipped 0.99% to end the day at 3,174.12. The Nikkei 225 finished with losses of 3.84% at 11,165.69.