world growth

world growth

Friday, April 1, 2016

China Factory Indicators go up, is the economy pick up ?

April 1, 2016

The "significant pickup" indicators contradict most forcasts.

BEIJING-Two key gauges of Chinese factory output registered a pickup in March on signs that policies aimed at boosting growth were having some impact.

China’s official manufacturing purchasing managers index increased to 50.2 last month month from 49.0 in February, according to the National Bureau of Statistics. This is the first time in eight months the figure has been at or above 50, the level dividing expansion from contraction. A separate indicator, the private Caixin manufacturing PMI, rose to 49.7 in March from 48.0 in February. The statistics agency also said the official nonmanufacturing PMI rose to 53.8 in March from 52.7 in February.

China's stock market had major crash and correction last year (2015). Shanghai's real estate market is still going up.

Economists said optimism in March among manufacturers was boosted by greater stability in the yuan after a volatile start to 2016, a boost in Chinese stock markets and signaling at China’s annual legislative session earlier in the month that growth will remain a priority.

Policy pronouncements included a higher target for the nation’s fiscal deficit this year, set at 3% of gross domestic product compared with last year’s 2.3%. And China cut required bank reserves in late February by 0.5 percentage point to 17%, releasing an estimated $108 billion into the financial system.

But economists cautioned that the world’s second-largest economy continues to battle deeply entrenched problems that could take years to work through.

“It’s quite a significant pickup,” said OCBC Bank economist Dongming Xie. “But it doesn’t mean we’re going back to a very bullish sentiment. Challenges remain, such as overcapacity and high debt, that you can’t solve in one or two days.”

Official subindexes tracking production, new orders, import prices and new export orders all improved, suggesting the pickup is relatively broad-based, economists said.

“We suspect this reflects a pick-up in state-led infrastructure spending, although a more buoyant property market may also have played a role,” said Julian Evans-Pritchard, an economist with Capital Economics, in a research note. He said he saw the improved sentiment as a sign recent stimulus measures are gaining more traction.

Zhao Qinghe, an economist with the statistics bureau, said the outlook for both large and small companies improved modestly, although the large companies’ sentiment moved into expansion territory last month while that of their smaller counterparts remained in contraction. “However, companies are still facing many difficulties in their operations,” he said, including funding shortfalls, weak demand and rising costs.

The March PMI results follow other signs of tepid improvement in the Chinese economy. Prices rose 22% year on year in China’s largest real-estate markets in February, according to a private survey, compared with a 19% rise in January even as many smaller property markets continue to struggle. And industrial profits in China rose 4.8% in February from a year earlier, their first increase in a year and a half.

The Shanghai Composite Index was slightly lower in morning trading after the results were posted.