China Services Sector and US Manufacturing Signal Recoveries in Largest Economies

Demand picked up in the U.S. manufacturing sector in August, data showed on Tuesday, which together with a report showing steady growth in China’s services sector added to signs of strength in the world’s two biggest economies.

Overall growth in the U.S. manufacturing sector eased in August as output grew at the slowest pace in 10 months. But a pickup in new orders, along with a drop in inventories, pointed to faster growth ahead.

Financial data firm Markit said its final U.S. Manufacturing Purchasing Managers Index fell to 53.1, below July’s reading of 53.7 and the initial August reading of 53.9. A reading above 50 indicates expanding activity.

“At the same time, inventories of finished goods showed the largest fall since 2009 as some companies reported that demand often exceeded production,” said Markit chief economist Chris Williamson. “Factories will need to ramp up production to replace depleted inventories given this order book growth.”

In China, domestic demand helped the services sector grow steadily in August, suggesting government measures have started to steer Asia’s biggest economy out of its longest slowdown.

The Chinese non-manufacturing purchasing managers’ index (PMI) dipped slightly to 53.9 last month from July’s 54.1 to match June’s reading, the National Bureau of Statistics said.

“The rise in new orders set a good foundation for growth in the next few months,” Cai Jin, a vice head of the China Federation of Logistics and Purchasing, which compiles the index on behalf of the National Bureau of Statistics, said in a statement.

Faster global growth could help persuade policymakers at the U.S. Federal Reserve to slow their massive bond purchase program soon.

via Reuters

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza