Indian Government building, Delhi. Image: Laurie JonesThere was good news on the economies of both China and India, today (1st November).
The latest purchasing managers’ indexes – PMIs –covering Chinese and Indian manufacturing performance in October are out. And they are not half bad.
The PMI for India rose to 54.4. That may not mean an awful lot, but to put it in context any reading over 50 suggests expansion. In fact, it was the highest reading for this index in two years. Just as importantly, the index has been picking up for some time, suggesting that this latest good showing is no flash in the pan, rather it is consistent with the trend.
As for China, the PMI rose. Actually, there are two PMIs for China, the version produced by Markit on behalf of Caixin rose from 50.1 to 51.2, the official version, produced by the Chinese government, rose from 50.4 to 51.2.
More to the point, both the Chinese PMIs are at a 27-month high.
Looking at India, Shilan Shah, India Economist for Capital Economics said: " Prospects for manufacturers also depend on the government's reform agenda. The passage of the long-awaited Goods and Services Tax (GST) in August has also lifted the mood of local industry. Once implemented, the GST should help to ease complexities in the domestic tax system and boost domestic trade.
“There are still other structural constraints. High on the list of priorities is pushing through measures to ease land acquisition laws and increase the efficiency of the labour market. Political opposition means that implementing reform in these areas is likely to be even more difficult than was the case with the GST. Given this, a sustained pick-up in manufacturing activity seems unlikely.”
As for China, Julian Evans-Pritchard, China Economist, for Capital Economics said: “Given the continued feed-through from earlier policy easing, we expect activity to hold up well until early next year. Beyond that, however, the recovery is likely to stall. There are already signs that the recent props to growth may not last much longer. The lack of further policy easing this year has meant that credit growth has already begun to slow again. Meanwhile, the housing market has begun to cool thanks to newly imposed property purchase restrictions. As these props to growth fade, they will re-expose the structural drags that continue to weigh on the economy and are likely to result in a renewed slowdown over the next couple of years.”
