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PMI marks 3rd month in positive territory

CHINESE manufacturing continued its growth momentum in May, indicating that the foundation for economic recovery is getting stronger, two surveys showed yesterday.

The official Purchasing Managers Index, compiled by the China Federation of Logistics and Purchasing as a measure of the nation's manufacturing activities, reached 53.1 last month - the third straight month in positive territory.

A reading above 50 indicates expansion.

The figure edged back slightly from April's 53.5 mark, but analysts said the small fluctuation was no cause for alarm.

Meanwhile, the brokerage firm CLSA said yesterday its China PMI rose for the second straight month to 51.2 in May from 50.1 in April.

"The fall in the official PMI may reflect moderation in the recovery pace after the strong sequential expansion from March. But the sub-components of the PMI indicated that the foundation of the recovery has solidified," said Wang Qing, a Morgan Stanley economist.

Most of the key sub-indexes ran above 50 in May, including production, which stood at 56.9. New orders posted a 56.2 reading, input prices 53.1 and new export orders 50.1.

Of key importance, new export orders registered a plus-50 reading for the first time since June last year, which indicates that China's decline in exports, the sector hardest hit by the global recession, may have leveled off.

"We believe export growth has bottomed out, and we forecast that China's economic growth will accelerate in each of the year's remaining quarters," said Wang, who expects the PMI readings to remain above 50 in the coming months.

China's exports fell 22.6 percent in April, widening from a 17.1 percent drop in March and sparking fears of a prolonged economic slowdown.

Economist Peng Ken at Citigroup said the official PMI beat expectations of a 50.5 reading and helped ease worries that manufacturing would drop back into a contraction mode this month.

"The smaller-than-expected monthly retreat in May was encouraging. This suggests stimulus efforts are sustaining production recoveries," Peng said. "Overall, we think the May numbers suggest a trend of economic stability."

Some experts, in fact, recently upgraded their forecast for China's economic growth this year. Morgan Stanley raised its projection from 5.5 percent to 7 percent, Goldman Sachs from 6 percent to 8.3 percent, and Shenyin & Wanguo Securities Co from 7.6 percent to 8.3 percent.


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