By Bob Blandeburgo
While the rest of the world shows signs of life and inches closer toward economic recovery, China appears to be ahead of the curve.
China's Purchasing Managers Index (PMI) inched only slightly upward in June to 53.2 from 53.1 the month before, but demonstrated its resilience as it recorded its fourth consecutive month of growth. The news prompted China's benchmark Shanghai Composite Index to rise above 3,000 points for the first time in more than a year and reflected the nation's massive $585 billion stimulus efforts that began in November.
"China's recovery is gathering further momentum," Bank of America Merrill Lynch economist Lu Ting told Bloomberg News. "It has been recovering faster than the market had expected."
Fan Gang, an adviser with China's central bank, expects the country's recovery to be U-shaped, with export growth returning to "normal" by the end of this year or early 2010.
Neighboring India suffered a slight drop in its PMI in June, but still stayed above the important threshold of 50 that separates contraction and expansion. India's PMI fell to 55.3 last month, down from 55.7 in May according to RTT News.
Japan's PMI also grew, but remained below the key 50 or higher representing expansion. The Nomura/JMMA Japan Manufacturing PMI rose to a 48.2 in June, the highest since 48.6 in April 2008. June was the 16th consecutive month of contraction in Japan.
"We expect the recovery of the Japanese economy to become clearer as the manufacturing sector picks up on the back of rising exports," Nomura Securities economist Minoru Nogimori told Reuters.
Japan's closely watched Tankan survey of 210,000 private firms (excluding financial institutions) taken quarterly by the central Bank of Japan, recovered to a minus 48 in June from its record low of minus 58 in March. The new data is an improvement, but is a much lower reading than what economists were expecting, The New York Times reported. A negative reading in the survey means more companies are pessimistic than optimistic. The Tankan is expected to reach minus 30 in September.
Here in the United States, the PMI had its sixth consecutive gain in as many months, but is still contracting. For June, the PMI rose to 44.8 from May's 42.8 according to Tempe, Ariz.-based Institute for Supply Management (ISM).
"The past relationship between the PMI and the overall economy indicates that the average PMI for January through June (39.2) corresponds to a 0.6% decrease in the real gross domestic product," said Norbert J. Ore, ISM chair of the Institute for Supply Management Manufacturing Business Survey Committee. "However, if the PMI for June is annualized, it corresponds to a 1.1% increase in real GDP annually."
While there are glimmers of hope in the ISM's report, one area of disappointment was new orders, which fell to 49.2 in June after growing in May to 51.1. Hurting the new order index was the contraction of apparel, leather and allied products; furniture and related products; computer and electronic products; food, beverage and tobacco products; and machinery.
News and Related Story Links:
- Money Morning:
Five Ways to Profit From China's $585 Billion Stimulus Plan
- Bloomberg News:
China Manufacturing Expands a Fourth Month, PMI Shows
- RTT News:
Indian Market Ends Volatile Session Higher
Japan PMI Improves for Fifth Straight Month in June
- The New York Times:
Muted Recovery Seen in Asia, With a Long Way to Go
- Institute for Supply Management:
June 2009 Manufacturing ISM Report On Business