Econintersect: For the first time in six months the HSBC PMI for small and medium size mostly private manufacturing firms has a reading above 50, indicating expansion. The reading of 50.8, up from 49.4 in May, was much stronger than had been expected. Reuters had reported that 49.7 was expected.  The current report is the preliminary “Flash” report based on 85-90% of final total respondents. The final report, due 01 July, has an average absolute difference value of 0.4 so the final reading is quite unlikely to fall back below 50.
The rise in the index is attributed to new orders from domestic customers as well as exports. The Chinese government has recently been rolling out several measures to boost its economy, such as tax breaks for small businesses in April and cutting banks’ reserve-requirement ratio in May. Fortunately for the second-largest economy in the world, these steps aimed at promoting economic growth seem to be paying off.
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Markit provided the following data summary:
The output (production) component of PMI was even stronger than the overall index with a reading of 51.8. Both the overall and production component registered seven-month highs.
Hongbin Qu, Chief Economist and Co-Head of Asian Economic Research at HSBC had the following comments on the report:
