China factory activity jumps strengthening hopes of stable economy

Activity in China’s industrial heartland has rebounded strongly in both official and unofficial readings of manufacturing activity in October.

Both the official purchasing managers index published by the national Bureau of Statistics and the Caixin PMI came in at 51.2, the first significant bounce in activity in two months.

A PMI reading above 50 represents expanding activity, while below 50 is a contraction.

The official NBS survey is strongly weighted towards activity in the large state-owned enterprises, while the survey from the Caixin media company has a sharper focus smaller, private enterprises.

Both surveys beat analyst expectations by a wide margin, with the Caixin survey reporting the fastest growth in more than two years, and output expanding at its quickest pace in five-and-half years on the back of new order growth.

“The index readings for new orders and output for October were both much higher than in September, and those for input and output prices rose even more,” said Caixin’s chief economist Dr Zhengsheng Zhong.

Capital Economics’ Julian Evans-Pritchard said the rebound appeared largely to be driven by stronger domestic demand rather than improved export conditions.

Employment decline slows

Employment showed signs of recovering, with job numbers still declining but at a slower pace than in previous months, while producer cost inflation grew at its fastest pace since early 2011.

“The breakdown of the PMIs show large pick-ups in the output and new orders components,” Mr Evans-Pritchard said.

“Stronger domestic demand appears to be responsible, with the new export orders sub-index of both PMIs actually falling.

“The breakdown of the official PMI by firm size suggests that the latest improvement in conditions has been concentrated among small and medium sized firms — the sub-index for large firms actually edged down.

“This is consistent with the big increase in the Caixin PMI, which is skewed towards smaller private firms, and suggests the policymakers’ recent efforts to support the private sector may be bearing some fruit.”

Strength was also evident in the broader economy, with the non-manufacturing PMI rising to its strongest reading in almost a year with growth in the services sector more than outpacing a contraction in construction.

“Overall, today’s data are unambiguously upbeat and consistent with broader evidence that the economy is currently in the midst of a cyclical recovery,” Mr Evans-Pritchard said.

However, the sugar hit from easier policy may start easing early next year, Mr Evans-Pritchard suggested.

“Beyond that, however, the recovery is likely to stall as the boost from stimulus fades, re-exposing the structural drags that continue to weigh on the economy,” he said.

http://www.abc.net.au/news/2016-11-01/factory-activity-boost-strengthens-hopes-for-china’s-economy/7983908

Tags: , , , , , , , , , , , , , ,

One Response to “China factory activity jumps strengthening hopes of stable economy”

  1. daveyone1 Says:

    Reblogged this on World Peace Forum.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s


%d bloggers like this: