China’s manufacturing sector and economy in 3Q20

China’s manufacturing PMI edged down from 51.1 in July to 51.0 in August, and then rose to 51.5 in September. The headline PMI readings have stayed high in recent months, indicating that the manufacturing sector is continuing its strong recovery from the COVID-induced slowdown. (See exhibit 1)

Production activities have expanded at a relatively fast pace in recent months, as shown by the strong output index throughout July to September. The expansion was supported by a fast growth in overall new orders: The new orders index rose from 51.7 in July to 52.8 in September, indicating a quicker pick up in the overall market demand lately.

Prices of industrial products have risen: The ex-factory prices index stayed above 52.0 in the quarter. The rise in product prices was partly attributed to the surge in the prices of materials: The input prices index went up from 58.1 in July to 58.5 in September, well above the neutral level of 50.

Exhibit