Those expecting a letdown after China’s “official” manufacturing gauge unexpectedly rebounded into expansion territory over the weekend were surprised on Monday.
The Caixin manufacturing PMI printed 51.8 for November, slightly better than the 51.5 consensus was expecting and up by the slimmest of margins from October (51.7). A year ago, it sat at 50.2.
This marks the fourth straight month during which the outlook has improved.
Output fell to 52.9 from 53 in October, but remained in expansion for a fifth straight month.
The commentary that accompanies the data is broadly upbeat.
“PMI data signaled a further modest improvement in the health of China’s manufacturing sector during November”, the press release reads. “New business rose strongly underpinn[ing] a further solid increase in production [and] new export orders saw the first back-to-back monthly rise for over a year-and-a-half”.
This should add to a generalized sense of optimism to start the new week, and will surely lead to speculation that some of the abysmal data the market was forced to digest from October may improve once the November numbers are released over the coming weeks.
Still, doubts about the trade negotiations persist and nobody that we know of is calling for a sudden, dramatic inflection in the Chinese economy. If anything, the hope is simply that things stabilize and then begin to gradually improve.
“The recent PMI uptick in China has been THE key in turning the Global PMI trend”, Nordea wrote Friday, adding that “neither developments in industrial metals, Shanghai composite nor the Chinese credit impulse suggest upside risks to the PMI figure – rather the opposite”.
As you can see, skepticism abounds, and it’ll probably take a decent set of November activity numbers (i.e., retail sales, IP and fixed investment), along with better trade data and signs that credit growth is picking up again to make believers out of anyone who isn’t already inclined to be optimistic.