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Purchasing data spark optimism

By Wang Yanlin | May 5, 2009, Tuesday | Print Edition

TWO new surveys provided signals that China's manufacturing sector may be verging on recovery, and higher employment ratings showed the country's massive effort to boost the economy could be paying off.

The brokerage firm CLSA said yesterday that its China Purchasing Managers Index, which tracks the activities of more than 115 companies in the manufacturing sector, rose to 50.1 in April from 44.8 in March - entering expansionary territory for the first time in nine months. A reading above 50 indicates expansion.

Growing output, export orders, new orders and employment all contributed to the increase in the key indicator, the firm said in a report.

'Upside surprises'

It reinforced similar signs provided by data released on Saturday by the China Federation of Logistics and Purchasing. Its April PMI grew to 53.5 from 52.4 in the previous month, the second rise in a row.

"The breakdown of the PMI showed a few upside surprises," said Sherman Chan, a Moody's Economy.com analyst. "New orders continued to increase, as domestic demand has picked up. Export orders - despite still being in contractionary territory - also displayed encouraging signs."

The CLSA ratings showed that new orders, an indicator of future output, earned a reading of 50.9 in April, up from 43.6 in March, while the index for export orders accelerated to 48.8 last month from 41.4 a month earlier.

An increase in staff among Chinese manufacturers was also recorded, with the employment index rising to 50.9 in April from 47.1 in March, the first jump since last July.

"The outlook for China's manufacturing employment has become more optimistic, as local production orders are rising and external demand also seems not far from the bottom," Chan said.

China has implemented a 4-trillion-yuan (US$586 billion) stimulus package to boost an economy buffeted by the global financial crisis. The country also raised rebates on export taxes, increased credit and provided more subsidies for rural economic development to counter the slowdown.

Li Maoyu, an analyst at Changjiang Securities Co who believes the domestic economy bottomed out in the first quarter, expects a rapid pickup in the second quarter and then a stabilizing trend.

China's gross domestic product grew 6.1 percent from a year earlier in the first three months, the weakest advance since 1992 when quarterly data were first released.

The State Information Center, the research unit under the National Development and Reform Commission, China's top economic planner, said in a report yesterday that China's GDP may expand 7 percent in the second quarter.

"China's sharp economic slowdown has showed signs of a break with an improving global environment, and a few economic barometers have provided fresh evidence of a recovery," the report said.

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