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China factory Activity Jumps Strengthening Hopes Of Stable Economy

Date 01-Nov-2016
Subject China factory Activity Jumps Strengthening Hopes Of Stable Economy

Activity in China's industrial heartland has rebounded strongly in both official and unofficial readings of manufacturing activity in October.

Both the official purchasing managers index published by the national Bureau of Statistics and the Caixin PMI came in at 51.2, the first significant bounce in activity in two months.

A PMI reading above 50 represents expanding activity, while below 50 is a contraction.

The official NBS survey is strongly weighted towards activity in the large state-owned enterprises, while the survey from the Caixin media company has a sharper focus smaller, private enterprises.

Both surveys beat analyst expectations by a wide margin, with the Caixin survey reporting the fastest growth in more than two years, and output expanding at its quickest pace in five-and-half years on the back of new order growth.

"The index readings for new orders and output for October were both much higher than in September, and those for input and output prices rose even more," said Caixin's chief economist Dr Zhengsheng Zhong.

Capital Economics' Julian Evans-Pritchard said the rebound appeared largely to be driven by stronger domestic demand rather than improved export conditions.

Employment decline slows

Employment showed signs of recovering, with job numbers still declining but at a slower pace than in previous months, while producer cost inflation grew at its fastest pace since early 2011.

"The breakdown of the PMIs show large pick-ups in the output and new orders components," Mr Evans-Pritchard said.

"Stronger domestic demand appears to be responsible, with the new export orders sub-index of both PMIs actually falling.

"The breakdown of the official PMI by firm size suggests that the latest improvement in conditions has been concentrated among small and medium sized firms — the sub-index for large firms actually edged down.

"This is consistent with the big increase in the Caixin PMI, which is skewed towards smaller private firms, and suggests the policymakers' recent efforts to support the private sector may be bearing some fruit."

Strength was also evident in the broader economy, with the non-manufacturing PMI rising to its strongest reading in almost a year with growth in the services sector more than outpacing a contraction in construction.

Source: Abc.net.au

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