China’s flash PMI was 50.4 in November from 49.5 in October, hitting a 13-month high, with the flash manufacturing output index jumping to 51.3 from October’s 48.2, data from Markit and HSBC showed.
New export orders reversed their trend, posting an increase, but overall new orders increased at a slower rate. Employment and backlogs of work contracted at a slower rate, while output prices decreased, changing direction.
The solid increase in the index suggested that the upswing in China was broadening out to smaller manufacturing companies, and it supports the view that the cyclical upswing in China was gathering strength, Klaus Baader, an analyst at Societe Generale, said.
But China’s recovery will depend on its key export markets.
“There are huge doubts about how sustainable this is, really,” Chris Williamson, chief economist at Markit, told Emerging Markets.
He noted that US PMI signaled the strongest manufacturing business conditions in 5 months in November, while consumer confidence was the highest in 5 years this month.
US ‘HOLDS THE KEY’
But the US “faces problems in relation to the ‘fiscal cliff’,” Williamson said, and China’s other key export market, the eurozone, is going deeper into recession, according to the latest figures which showed services PMI at a 40-month low.
“I think the US holds the key to what will happen to China over the next 6 months or so,” said Williamson. “Exports hold the key for China’s growth for now.” Economists at Capital Economics pointed out that “demand at home is probably weaker than first appears.”
“While the component for new orders overall fell, new export orders surged from 46.7 to 52.4, the largest monthly rise since April 2009. This implies that domestic orders weakened,” they wrote in a market note.
They said the other parts of the PMI were “mildly encouraging” and that overall the figure “further strengthens the view that conditions in China’s economy have turned around.” “But,” they added, “we believe the recovery is patchy.”
Hongbin Qu, the chief economist for China at HSBC, shares the doubts about the strength of the recovery.
“It is still the early stage of recovery and global economic growth remains fragile,” he said in the statement announcing the data. “This calls for a continuation of policy easing to strengthen the recovery.”