COLUMN – Weak China PMIs won’t automatically lower commodity imports – by Clyde Russell (Reuters India – September 1, 2015)

http://in.reuters.com/

China’s various purchasing managers’ indexes gather significant attention as indicators of the health of the world’s second-biggest economy, but they are less useful as a predictor of commodity imports.

The official Purchasing Managers’ Index (PMI) fell to a 3-year low of 49.7 in August, in line with market expectations and down from a reading of 50 in July.

The drop below the 50-level that separates expansion from contraction will be viewed as another sign that China is struggling for growth momentum, and raises further questions over whether 2015’s official target of a 7-percent increase in gross domestic product can be realised.

The Caixin/Markit PMI dropped to 47.3 in August, the weakest since 2009 and down from 47.8 in July.

The official PMI focuses on large, state-controlled companies, while the Caixin/Markit measure encompasses more small- and medium-sized enterprises.

In theory, the weakening of the PMIs should spell gloom for commodity import volumes, but it may not be as dire as feared.

While PMI readings below 50 are certainly a negative for China’s commodity demand, history suggests that the prevailing price and stockpiling demand are more important drivers of imports.

For the rest of this article, click here: http://in.reuters.com/article/2015/09/01/column-russell-china-commodities-idINKCN0R12MC20150901

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