China's official PMI prints for September presented, in aggregate, a softer backdrop. Encouragingly, the manufacturing PMI moved back into expansion territory, albeit just at 50.1 (49.7 expected). However, the Caixin manufacturing PMI slipped deeper into contraction territory at 48.1, well below 49.5 expected. The non-manufacturing PMI (official) fell more than expected as well to 50.6 (52.4 forecast)
- The detail showed output and new orders rising for the manufacturing PMI, but employment only just edged higher to 49.0. New export orders were also down to 47.0, but this remains above earlier lows (41.6 in April).
- The weakness in the Caixin MI still suggests headwinds for the SME sector. The Chengdu lockdown likely weighed on this space through the month
- The non-manufacturing PMI was always at risk of dipping given these Covid related headwinds in September. The chart below plots the headline reading against retail sales y/y.
- The detail was fairly soft in the non-manufacturing PMI, with new orders dipping to 43.1 (from 49.8 last month).
- With Covid cases coming down, there will be hope that conditions improve in October. Still, these updates may still concerns around near term growth momentum, particularly in the services/SME side of th economy.
Fig 1: China Non-Manufacturing PMI Versus Retail Sales Y/Y
Source: MNI - Market News/Bloomberg