China’s PMI More Stable

China’s factory activity continued to contract in July, but the figure was much better than it has been in several months. Economists took this as a net positive sign. The HSBC China manufacturing Purchasing Managers’ Index, which offered preliminary information for July, posted a number of 49.5 on a 100-point scale. June’s final figure was 48.2.

That the data were considered good shows how desperate economists are to find some upbeat news from the world’s second-largest nation by gross domestic product. A contraction is a contraction, no matter that the process has slowed somewhat.

One aspect of China’s numbers that concerns experts is that the government may be spinning data so that they appear better than they actually are. Regardless whether this is true, initial figures on economic activity are not reliable, even in the United States. Many figures that governments issue, no matter how sophisticated the data gathering process is, can be revised once or twice over a period as long as two or three months.

The July China PMI data still signal anemic demand for manufactured goods made in the People’s Republic. One month does not a trend make. The signs from the European Union, United States and Japan indicate that consumer activity has slowed — and in some cases in Europe, that activity is in retreat.

In less than a month, the China PMI data for July will be revised to “final” numbers. Then, almost immediately, the data for August will be released. Today’s modest optimism about China’s prospects could turn back to pessimism in a matter of weeks.

Douglas A. McIntyre