A good beat on the previous and on expectations.
- In the past 18 months, the index has only dropped below 50 once, in August.
Over the weekend we had the official PMIs for October:
The two surveys (official and Markit) for the two PMIs are different, so its not unusual for there to be some difference between the two results. But, one showing worsening and contraction, and other improvement, a beat, and expansion is a bit unusual.
The Markit PMI has a great representation of smaller enterprises.
From the Markit report (bolding is mine)
Commenting on the China General Manufacturing PMI™ data, Dr. Wang Zhe, Senior Economist at Caixin Insight Group said:
- "The manufacturing sector featured a combination of strong demand and weak supply last month. Output shrank for the third consecutive month, and at a faster clip than the previous month. Power cuts and rationing, raw material shortages and commodity price hikes were the reasons behind the supply contraction. Demand continued to recover with the subindex for total new orders rising further into expansionary territory. Overseas demand remained sluggish as new export orders dropped for the third straight month.
- "The job market remained stable, though it shrank slightly due to weak supply. The gauge for employment had stayed in contractionary territory for three consecutive months.
- "Inflationary pressure remained high. Input costs rose for the 17th month in a row, with the growth rate accelerating to the highest since December 2016. Raw material and energy prices rose sharply, pushing up manufacturers' costs. Transportation costs also increased. The measure for output prices jumped to the highest in five months as enterprises raised prices to pass their higher costs downstream. Increases in prices charged by producers of intermediate products were particularly substantial.
- "Suppliers' delivery times rose sharply as the power crunch and raw material shortages disrupted logistics. The gauge for delivery times hit the lowest point since March 2020. Manufacturers cut purchases due to multiple factors including weak supply, the power crunch and raw material shortages. Last month, the gauges for quantity of purchases and stocks of purchases declined to the lowest since February 2020 and March 2020, respectively.
- "Surveyed manufacturers remained optimistic about the outlook for business and market demand, but some expressed worries about the nominalization of supply chains.
- "To sum up, manufacturing recovered slightly in October from the previous month. But downward pressure on economic growth continued. We noticed that the pandemic's impact on manufacturing faded from late September to mid-October as the number of new Covid-19 cases dropped, which boosted demand. However, supply strains became the paramount factor affecting the economy. Shortages of raw materials and soaring commodity prices, combined with electricity supply problems, created strong constraints for manufacturers and disrupted supply chains. Input costs for manufacturers have risen much faster than output prices for several months, putting a lot of pressure on downstream enterprises.
- "Policymakers should not only take effective measures to stabilize commodity supplies and prices, but also pay close attention to downstream firms, especially small and midsize ones. In addition, a new wave of Covid-19 outbreaks has reappeared in many central and western regions since late October, which means re-emerging economic disruptions. It is critical to balance the goals of controlling the outbreaks and maintaining normal economic activity.
Again, familiar themes in that commentary. Energy sup[ply disruption, supply-chain bottlenecks, COVID-19 impacts. Despite these this is a solid PMI result and augers well ahead.