Tuesday, November 1, 2011

China HSBC PMI picks up in Oct, inflation eases

BEIJING (Nov 1): HSBC's China Purchasing Managers' Index for October rebounded above the 50-point boom-bust demarcation for the first time since June, showing a strong expansion of manufacturing activities in the world's second-largest economy, while factory inflation eased to a four-month low.

The purchasing managers' index (PMI), designed to preview conditions in a broad range of industries before the official monthly output data release, rose to 51 in October from 49.9 in September.

The 50-point level in the PMI demarcates expansion from contraction, with a reading above 50 indicating growth.

"The final PMI confirms the notable improvement in China's manufacturing activities driven by rising new business from both domestic and external markets," said Qu Hongbin, China economist at HSBC.

Factory inflation in China slowed to a four-month low, with the subindex for input prices easing to 53.2 in October from 59.5 in September, suggesting that Beijing's measures to contain price rises have had some effect.

"This provides leeway for Beijing to fine-tune policy to strike a better balance between growth and inflation priorities," he added.

China's Premier Wen Jiabao said last week that Beijing would fine-tune its macro policies if necessary, reinforcing some economists' expectations that the government may ease some credit curbs to support the economy, which is facing headwinds from weakening external demand.

The final reading for HSBC's China PMI is slightly lower than the flash PMI reading of 51.1 published earlier this month .

The reading was at odds with China's official PMI for October, which showed an unexpected decline in the montly index to 50.4 from September's 51.2 and well below a forecast reading of 51.6. It is not unusual for the two PMI indices to produce conflicting results.

The full HSBC China PMI report, compiled by British research firm Markit, also pointed out the following:

--Factory output rose for a third consecutive month in October, but the output sub-index indicated only marginal expansion.

--The new orders sub-index climbed to above 50 for the first time since July, indicating Chinese manufacturers' new business received from abroad rose during October.

--The sub-index for stocks of purchases remained below the 50-point mark for the tenth successive month, signalling a continued decline in pre-production inventories.

-- Average input prices continued to rise in October, but the rate of input cost inflation eased further.

-- The employment sub-index rose marginally, suggesting a slight gain in manufacturing sector jobs. - Reuters

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