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February 2, 2010

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Home » Business » Economy

Indexes of industry rise; sign of recovery

CHINESE manufacturing kept expanding in January, and the sector's stable growth should help to cement China's economic recovery, a pair of indexes showed yesterday.

However, the growth in raw-material prices indicated more inflationary pressure ahead, leading economists to call for tightening moves.

The official Purchasing Managers Index, a measure of the nation's manufacturing activities, settled at 55.8 percent in January, the China Federation of Logistics and Purchasing said. It slipped 0.8 percentage points from a month earlier.

The figure has been above 50 percent - the threshold indicating expansion -for 11 consecutive months.

Meanwhile, the HSBC China Manufacturing PMI rose to 57.4 last month from 56.1 in December, reaching a record high since the survey began in April 2004.

Relatively fast

Compared with the official PMI, weighted heavily towards big domestic companies, the HSBC survey is slanted more towards privately owned and export-oriented firms.

"The official PMI kept running at a relatively fast speed in January," said Zhang Liqun, an analyst at the logistics and purchasing federation. "It slowed down a bit, indicating the requirement of an adjustment to stabilize the rapid growth in the previous months."

Inside the official PMI, production retreated 0.9 percentage points to 60.5 percent. New orders, stocks of major raw materials and employment stood at 59.9 percent, 52.2 percent and 50.6 percent respectively, all indicating expansion.

Prices of manufacturing inputs, which can reflect a trend of inflation, went up 1.8 percentage points to 68.5 percent.

The HSBC PMI showed near-record increases in manufacturing output and incoming new business. Employment growth maintained a fast pace for an eighth straight month.

Prices rise

Prices charged by Chinese manufacturers rose again in January, extending the current period of inflation to seven months.

The rate at which firms raised their prices was the most marked since July 2008, mainly reflecting rising input costs, the survey said.

Qu Hongbin, chief economist for China at HSBC, said the data implied that growth in gross domestic product may strengthen in the first quarter, but rising input and output prices also pointed to greater inflationary pressure.

"It will likely prompt more tightening measures in the coming months," Qu said.

China's economy expanded 8.7 percent on an annual basis last year.

A strong rebound in external demand helped solidify a recovery in China's manufacturing sector, which gained 18 percent year on year in the last quarter of 2009.


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