While China's industrial activity hit a 16-month high in August, softening fears of a slowdown in its economy, India's manufacturing sector activity contracted for the first time in over four and a half years.
The official Purchasing Managers’ Index (PMI) for manufacturing in China rose to 51 from 50.3 in July. As in the UK PMI, a reading above 50 indicates an expansion.
China’s growth rate had slowed for two quarters in a row in 2013, causing the government to take several measures to boost growth.
In contrast, both output and orders in India’s manufacturing sector declined sharply, the India PMI showed.
The HSBC/Markit Purchasing Managers Index for the manufacturing industry stood at 48.5 in August, down from 50.1 in July, a significant contraction.
It was the first sub-50.0 reading of the Indian manufacturing PMI since 2009
By Europe’s standards, China’s absolute slowdown seems a nice problem to have: from April to June the economy expanded by 7.5%, down from the Q1 growth rate of 7.7%. Such numbers are down on the heady 9% and 8% rates of 2010 and 2011 but are no capitulation.
But in real terms, owing to its vast market of 1.4 billion people, a fall of just 0.1% growth in China represents a serious contraction in global demand for goods and services.
A slowdown in demand for Chinese exports from key markets such as the US and Europe has caused China’s manufacturing and export sectors to slip, which are key drivers of its economic growth.
In reaction to the inertia, the Chinese government last month suspended value-added tax and turnover tax for small businesses with monthly sales of less than RMB 20,000 ($3.26 or £2.125).
Supporting the run of news that the Indian economy slowed to just 4.4% to June, the HSBC/Markit PMI reported that new domestic orders placed at Indian manufacturers fell in August. Business from abroad also declined, ending an 11-month sequence of growth.
The PMI also showed that input and output price inflation slowed despite the weakening of the currency, likely in response to softening demand and, therefore, declining pricing power.
