China PMIs yield mixed readings in September

A batch of key surveys for Chinese economic activity in September yielded mixed readings, although economists said that overall they appeared to indicate that further weakness may lie ahead.

The official factory sector Purchasing Managers´ Index fell from a reading of 50.1 for August to 49.6 in September (consensus: 50.0).

Yet the private sector-compiled manufacturing PMI from Caixin headed straight in the other direction, jumping from 49.2 to 50.0 and easily beat economists' projections for a print of 49.5.

According to Pantheon Macroeconomics, the seemingly contradictory results from the two surveys, while "puzzling", were not unprecedented.

The official PMI was weighted more towards larger firms and had a greater domestic focus, the economic consultancy explained.

In particular, Pantheon noted the decline in the sub-index for employment in the official gauge, from 49.6 to 49.0, which "might be more concerning for Beijing given the focus on social unrest in recent missives regarding fallout from Evergrande."

As for the Caixin PMI, total sales improved even as output continued to fall.

"We would not view this as inconsistent with an energy-led slowdown. Until energy woes are resolved, further weakness seems likely," Pantheon said.

It was a somewhat similar story in non-manufacturing, with the corresponding PMI improving very sharply, from 47.5 to 53.2, as the sub-index for new orders largely recovered, rising from 42.2 to 49.0.

However, delve a little deeper and the sector split showed that while the index for services rebounded, improving from 45.2 to 52.4 as the recent waves of Covid faded, that for construction slipped due to Evergrande's woes.

"Further gains seem unlikely given little additional improvement is possible on the virus front, and that the construction sector outlook is likely to get worse before it gets better as Evergrande seeks to unload assets."