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Chinese Manufacturing Surprises to the Upside in August – This May be a Sign of Things to Come?

By: Natalie Scott-Gray, Senior Metals Demand Analyst, EMEA and Asia region

Chinese Manufacturing Surprises to the Upside in August – This May be a Sign of Things to Come?
 
Natalie Scott-Gray 
Senior Metals Analyst 
natalie.scott-gray@stonex.com

Overnight, China released the first major economic data point for the month of August, PMI readings, which typically are seen as a barometer of what we can expect when it comes to the release of other data points for the previous month. In today’s commentary we break down the latest numbers and what this means for the base metal market. 

PMI Breakdown 
Manufacturing 

•    Headline manufacturing rose to 49.7 from 49.3, against market expectations of a fall (49.2) 

•    New orders (which are a proxy for domestic demand), rose above 50 (to 50.2) for the first time since March 2023

•    Production rose to its highest level since March 2023 at 51.9

•    New exports orders posted its first reduction in the pace of declines since February 2023, rising to 46.7. 

Services

•    Headline services came in at 51.0, moving below expectations of a more modest decline from its July reading of 51.5. This is the lowest reading since December 2022 and marks a fifth consecutive monthly drop. 

•    However, a bright spot occurred within the construction reading, which moved to 53.8 in August, reversing weakening activity since March 2023. 

In Our View

The better-than-expected readings for manufacturing, in particular the move into expansionary territory for new orders, has surprised the market, which was expecting another month of disappointing activity, given seasonal weakness and ongoing struggles within the property market. In addition to this, the rebound within the construction PMI has also supported a better than anticipated outlook in August, and combined, these elements are suggestive that we may have hit the bottom for base metal demand in the country this year. Further supporting this argument is the fact that September and October are traditionally periods of restocking in the country for construction materials. If you wish to read more on this topic, please see our article “Part 1: With Expectations Building for Higher Chinese Demand in the Months Ahead, We Take a Look at How Global Stocks Are Positioned”. 

Chinese PMI Manufacturing Readings 
Source: Bloomberg
 
 
Chinese PMI Services Readings 
Source: Bloomberg
 
July Versus June Economic Numbers Summary 
 
Source: Bloomberg
 
July Versus End-2022 Economic Numbers Summary 
Source: Bloomberg
 
 
 
  • Base Metals

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