China Caixin Manufacturing PMI (Nov.)

Industry goes from strength to strength

The Caixin manufacturing PMI hit a decade high in November. The official survey released yesterday also rose, to its highest in three years. While the rebound in industry will eventually lose steam, policy stimulus and strong global demand for Chinese-made consumer goods remain near-term tailwinds.
The Caixin manufacturing PMI rose from 53.6 in October to 54.9 in November (the Bloomberg consensus was 53.5 and our forecast was 53.8). (See Chart 1.) This is the highest reading since November 2010. Unlike the official survey which saw the delivery times measure soften, all components in the Caixin survey improved. (See Chart 2.)
Particularly encouraging was the employment component, which rose to its highest since 2011. (See Chart 3.) This supports our view that a tightening labour market will drive a further recovery in consumption over the coming months. Similar to the official survey, the export orders component of the Caixin PMI increased, from 51.0 to 53.3. Taken together, both surveys suggest that foreign demand for COVID-19 related products remains strong amid fresh lockdowns abroad and hints at a further acceleration in export growth in the near-term. (See Chart 4.)
The survey data suggest that manufacturing growth has continued to pick up in recent weeks, even as the industry proxy on our China Activity Proxy suggested that growth had already accelerated to a three-year high in October. In the near-term, we think supportive fiscal policy and strong foreign demand should keep industrial growth robust. And with yesterday’s official survey suggesting that the rebound in services activity is still accelerating, the economy is likely to remain above-trend in the coming months.