In the US our economic data for a few months at least will be on shaky ground due to the lingering economic impacts of severe hurricanes. In China, the potential for irregularity is perhaps as great, though it has nothing to do with the weather. In a little over a week, Communist Party officials will gather for their 19th Party Congress.
The temptation may exist to deliver a somewhat better economic picture than has been the case. The government spent a whole lot in resources betting on if not straight economic growth by now than at least a plausible path to it. So far in 2017, China’s economy, as the global economy, has not come close to living up to expectations.
To that end, just before the Golden Week celebrations commenced to start October, China’s National Bureau of Statistics suggested that China’s core manufacturing sector speeded up to a what amounted to a 5-year high. The official PMI rose for September 2017 to 52.4. That was the first index value above 52 since two months above 53 in 2012.
Not only that, the official non-manufacturing PMI also rose. After disappointing for five months, falling from 55.1 in March to 53.4 in August, this measure of mostly service sector activity jumped two full points to 55.4 in September. It was the highest level since May 2014.
The earlier trend in both PMI’s was far more consistent with other data in China as well as outside of it. There is clear but lethargic improvement in 2016 that at various points (depending upon the specific account in question) in 2017 either slowed remarkably or, as the non-manufacturing PMI, died off completely. It is a pattern we see replicated all over the world.
Given the possibility of political influence, it made sense to wait for corroboration before giving any interpretation of these results. It was very different for opening of the 18th Party Congress in November 2012, when China’s economy at that moment was believed to be capable of returning to pre-crisis growth. Though weakness was suggested as early as the “dollar” problems the previous summer, it was widely felt that any slowing would be temporary and easily overcome with the usual textbook “stimulus” (both monetary as well as fiscal).
