China PMI grows amid inflation concerns
By Wang Yanlin |
November 2, 2010, Tuesday
|
Print Edition
Print Edition
CHINESE manufacturing activities grew at a faster pace in October, fueled by rising domestic demand and stable exports, two surveys showed yesterday.
However, the risk of inflation increased as the index of input costs rose steeply last month.
The official Purchasing Managers' Index, a comprehensive gauge of industrial activities across the country, increased 0.9 percentage point from a month earlier to 54.7 percent in October, the China Federation of Logistics and Purchasing said.
A reading above 50 percent indicates expansion. The index has been in expansionary territory for 20 consecutive months.
Meanwhile, a HSBC survey showed that its China manufacturing purchasing managers' index jumped to 54.8 in October from 52.9 in September, the fastest pace since April.
While the official PMI is weighted heavily toward big domestic companies, the HSBC survey is slanted more toward privately owned and export-oriented firms.
Steven Zhang, an analyst at Morgan Stanley, said the official PMI increase was a wide margin considering the factor of noticeable seasonality.
"We had expected that October seasonality might drag PMI lower to some extent," Zhang said.
"After the seasonal adjustment, there was an even stronger improvement, supporting our call that China's economy has started to gain momentum, and this momentum should continue through the last quarter of this year into 2011."
October is usually less active for manufacturing because overseas Christmas orders are mostly finished.
China's gross domestic product expanded 9.6 percent year on year in the third quarter, better than the market's expectation of 9.5 percent. The growth moderated from a surge of 11.9 percent in the first quarter and 10.3 percent in the April-June period.
Qu Hongbin, chief economist at HSBC, said the PMI rise suggests strong growth momentum in domestic demand.
"Economic growth should come in at around 9 percent in the fourth quarter," Qu said.
Component indices under the official PMI showed that domestic demand grew strongly, with new orders leaping 1.9 percentage points to 58.2 percent. The new orders came mainly from machinery industries.
However, the risk of inflation increased as the index of input costs rose steeply last month.
The official Purchasing Managers' Index, a comprehensive gauge of industrial activities across the country, increased 0.9 percentage point from a month earlier to 54.7 percent in October, the China Federation of Logistics and Purchasing said.
A reading above 50 percent indicates expansion. The index has been in expansionary territory for 20 consecutive months.
Meanwhile, a HSBC survey showed that its China manufacturing purchasing managers' index jumped to 54.8 in October from 52.9 in September, the fastest pace since April.
While the official PMI is weighted heavily toward big domestic companies, the HSBC survey is slanted more toward privately owned and export-oriented firms.
Steven Zhang, an analyst at Morgan Stanley, said the official PMI increase was a wide margin considering the factor of noticeable seasonality.
"We had expected that October seasonality might drag PMI lower to some extent," Zhang said.
"After the seasonal adjustment, there was an even stronger improvement, supporting our call that China's economy has started to gain momentum, and this momentum should continue through the last quarter of this year into 2011."
October is usually less active for manufacturing because overseas Christmas orders are mostly finished.
China's gross domestic product expanded 9.6 percent year on year in the third quarter, better than the market's expectation of 9.5 percent. The growth moderated from a surge of 11.9 percent in the first quarter and 10.3 percent in the April-June period.
Qu Hongbin, chief economist at HSBC, said the PMI rise suggests strong growth momentum in domestic demand.
"Economic growth should come in at around 9 percent in the fourth quarter," Qu said.
Component indices under the official PMI showed that domestic demand grew strongly, with new orders leaping 1.9 percentage points to 58.2 percent. The new orders came mainly from machinery industries.
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