China production rebounds, ANZ tips GDP growth of 6.7% for 2017

HONG KONG - Strong production and a rebound in new orders lifted China’s manufacturing PMI in August as the effects from unfavourable weather conditions in previous months faded. The product and new orders sub-indices moved higher to 54.1 and 53.1 respectively in August from 53.5 and 52.8 in July.

ANZ Bank says business expectations also rose to a six-month high of 59.5. In addition, activity in the steel industry rose, with the industry’s PMI, which is compiled by a third party, surging to a record high of 57.2 in August, reflecting robust business sentiment.

Input prices continued to rise, foretelling sequential increases in the producer price index for August. Manufacturing purchasing prices rose to 65.3 in August from 57.9 prior, and input prices for non-manufacturing prices rose to 54.4 from 53.1 prior.

“This reinforces our view that deflationary risks in China have dissipated,” ANZ says. “We expect the producer price index (PPI) inflation to rise in August sequentially (range: 0.1-0.3% m/m) when the data is released next week.”

ANZ adds: “ We see an upside risk to our current GDP forecast of 6.5% for Q3. Our 2017 full-year GDP forecast of 6.7% is still a safe call.

“ The manufacturing PMI, which is closely correlated with GDP growth, averaged 51.55 in July and August, and is at least as high as the average of 51.5 in the first half of the year.

“If the data in September continues to be supportive, the growth outlook for China’s H2 could exceed market expectations for a slowdown.”  www.live.anz.com (ATI).