China manufacturing sector still improving, but slowly: HSBC

HONG KONG – China’s PMI readings for August came in mixed. In a research note, HSBC says the official manufacturing gauge, which surprised on the upside, suggests that domestic demand continues to benefit from fiscal stimulus.

“Alongside ongoing capacity adjustments in heavy industries, prices are showing further signs of recovery.,” HSBC says. “Meanwhile, the Caixin PMI, which is more volatile, moderated after a strong reading in July.

“Smoothing out the month-over-month volatility, economic activity appears to be still improving at a gradual pace.

“We still see challenges in the second half, from further moderation in the housing sector to uncertainties in private investment.

“Therefore despite some upside surprise, withdrawal of policy stimulus at this stage would be highly premature. In fact, fiscal expansion will likely need to continue at a strong pace, to ensure stable growth in the coming months.” www.hsbc.com (ATI).