HSBC Flash PMI at 3-month high
Print Edition
CHINA’S manufacturing sector in October has grown at the fastest pace in three months, but it is all not rosy, a preliminary reading released yesterday showed.
The HSBC Flash China Manufacturing Purchasing Managers’ Index, the earliest indicator of China’s industrial sector, landed at 50.4 in October, up from the final reading of 50.2 in September, according to HSBC and research firm Markit.
A reading above 50 means expansion. Although the figure for this month pointed at only marginal growth, it marked a three-month high that surprised the market.
Qu Hongbin, chief economist for China at HSBC, said the manufacturing sector likely stabilized in October but the economy still showed signs of insufficient effective demand.
“Domestic as well as external demand exhibited signs of slowing although both remained in expansion territory,” Qu said.
“Disinflationary pressures intensified, as both the input and output price indices declined further,” Qu said.
The components were indeed not so encouraging as the headline index suggested. The new orders edged down to 51.4 in October from 51.5 a month earlier; new export orders fell by 1.6 points to 52.8; and production dropped to 50.7 from 51.3. Input prices eased sharply by 3.1 points to 44, implying potential risks of disinflation.
Qu said this should warrant policy easing and more such measures are expected on both monetary and fiscal fronts in the months ahead.
Wendy Chen, an economist at Nomura, said the mixed signals suggested that growth momentum had only succeeded in stabilizing.
“More policy easing is needed to achieve a certain speed of growth,” Chen said. “We believe the government has already recognized this and has stepped up policy-easing efforts.”
China’s economy grew at the slowest pace in more than five years in the third quarter, but major activity indicators pointed at a stabilization in September, data from the National Bureau of Statistics released earlier this week showed.
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