Chinese PMI Indicates Incremental Growth

Posted In Politics - By Matt Schrock On Wednesday, February 6th, 2013 With 0 Comments

Chinese PMI Indicates Incremental Growth

China has been the world’s largest exporter for years, and this status has been a great boon for the Chinese economy, while buyers abroad purchased items cheaper than they could make for themselves. The recent economic slump has these manufacturers in a bind, however, due to the major markets in Europe and the United States weakening as consumers cut back on spending. Recovery from the global recession has been slow and uneven in the past months, or even halting. China’s PMI (Purchasing Managers Index) increased in January, but that the growth was not due to the pickup of business abroad as much as domestic increases.

`               Two different PMI’s were released on Friday, and both showed increases in China’s market. The official government bureau release was at 50.4, less than the expected 50.9 ‘nine month high’ and less than the 51 mark, telling of timid expansion in the market. In contrast a non-government report showed the PMI to be as high as 52.3, proof of an astounding difference in either methodology or accuracy between the two numbers. Although only one indicator of the health of the overall market, the PMI specifically addresses the most vital part of China’s economy, it’s manufacturing sector, on which many other countries rely, at least in part. The growth seen in the PMI is a good sign, but it doesn’t mean the woes of economic recovery are over for China.

Such spotty recovery is not limited to China; Asia in general has been feeling the tug of economic instability. Demand for Indian factory products trickled off from the previous increases in January so far, exposing that the Indian economy is in almost the same situation as China’s. The main difference is slower expansion (in India) versus almost no expansion (in China) in foreign buyers. If proof of the interconnected world markets is needed, look no further. Actions of consumers in the United States and Europe affect the manufacturing markets in Asia, which can affect prices in Europe and the U.S. which can affect consumer behavior… This is not set in stone to fail; prices could decrease and spark consumer confidence and spending, which could increase manufacturing sales and profits. Other Asian countries that had strong export profit and market expansion in January, like South Korea, still had their PMI fall below the expected level, signaling that the recovery of the global economy may be happening, but not so much as was hoped.

China’s fragile growth in manufacturing is not the hoped for full on recovery, but it indicates that the recession didn’t permanently damage key markets and industries in China, and that improvement is possible. The second largest economy in the world is affected by the first largest, and so on and so forth, so good PMI’s can also signal growth to happen elsewhere. For now, tiny increases are preferable to no increase at all.

About the Author

- Matt Schrock received Bachelor of Arts in Mass Media Communications from Penn State University.

Leave a comment

XHTML: You can use these tags: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>