China HSBC flash manufacturing PMI hits 7-month high in October
(Reuters) – Strong new orders drove the fastest expansion in China’s manufacturing sector in seven months in October, a preliminary survey showed on Thursday, more evidence that the economy is stabilizing although a strong rebound remains elusive.
The flash PMI figure, the earliest reading of China’s monthly economic performance, offers some positive news after disappointing export figures and September’s manufacturing PMI, which had shown weak domestic demand.
The Markit/HSBC Purchasing Managers Index (PMI) stood at 50.9 in October, above September’s final reading of 50.2 and marking a seven-month high. Ten of 11 sub-indices rose.
“China’s growth recovery is becoming consolidated into the fourth quarter following the bottoming out in the third quarter” said Qu Hongbin an HSBC economist in a statement.
“This momentum is likely to continue in the coming months, creating favorable conditions for speeding up structural reforms.”
New orders rose to 51.6, the highest in seven months and well above the 50 line separating expansion from contraction.
“From what we can see companies have drawn down inventories now, so once you get a little bit of demand you get orders coming in,” said Stephen Green, an economist with Standard Chartered bank.
The strong reading lifted Chinese stocks off two-week lows, although investors are jittery about possible policy tightening by the central bank to put a cap on rising inflation and housing prices. Those fears have seen short-term money rates surge this week.
GROWTH SEEN SLOWING
In the first nine months of the year, the $8.5 trillion economy grew 7.7 percent from a year earlier, putting it on track to achieve Beijing’s 2013 target of 7.5 percent, which would be the weakest growth in 23 years.
Still, many economists see growth slowing ahead as global demand remains soft and as Beijing restructures the economy towards one driven more by consumer demand than investment and credit.
“Despite the rise of this flash PMI reading, we believe sequential GDP growth peaked in the third quarter at 2.2 percent and people should expect moderation to a more sustainable growth rate of 1.8-2.0 percent in the fourth quarter,” said Ting Lu and economist with Bank of America-Merrill Lynch.