News & Reports News Year 2015 November 2015 Slight improvement in October PMI shows economy stabilizing

Slight improvement in October PMI shows economy stabilizing

CHINA’S private and export-oriented companies saw manufacturing activity shrink again in October although the decline was not as bad as that in the month before, suggesting the economy was stabilizing, a survey showed yesterday.
The Caixin China Purchasing Managers’ Index landed at 48.3 last month, up from 47.2 in September, to reach a four-month high, according to the Caixin magazine and research firm Markit.
A reading above 50 means expansion and below it suggests contraction. The October figure also marked the first rebound since June.
The PMI complemented October’s reading of 49.8 in the official PMI that weighs toward state-owned manufacturing companies. That performance was flat from September’s reading and ended a four-month deterioration.
He Fan, chief economist at Caixin Insight Group, said: “The slight upswing shows the manufacturing industry’s overall weakening has slowed down, indicating that previous stimulating measures have begun to take effect.”
But He noted the weak aggregate demand remained the biggest obstacle to economic growth, and the risk of deflation resulting from the continued fall in prices of bulk commodities required attention.
Liu Ligang, an economist at Australia & New Zealand Banking Group Co, said the central bank should continue to be accommodative and keep market interest rates low.
“As deflation risk intensifies, a further cut of reserve requirement ratio before the end of this year is still possible,” Liu said.
The Producer Price Index, a measure of inflation at the factory gate, fell 5.9 percent year on year in September, extending its downward trend to a 43rd month and suggesting rising deflationary pressure.
The People’s Bank of China last month cut benchmark interest rates for the fifth time this year and lowered the bank reserve requirement ratio to allow commercial banks to keep more funds after China’s economy grew 6.9 percent from a year earlier in the third quarter, its slowest pace in six years.