China Mfg Expands at Fastest Pace in 2 Years

Jan 24, 2013

China’s manufacturing is expanding at the fastest rate in two years, according to a private survey of companies, bolstering prospects that economic growth will accelerate for a second straight quarter.

The preliminary reading of a Purchasing Managers’ Index (SHCOMP) was 51.9 in January, according to a statement from HSBC Holdings Plc and Markit Economics today. That compares with the 51.5 final reading for December and the 51.7 median estimate of 17 analysts surveyed by Bloomberg News.

The data suggest that economic growth at the start of 2013 will equal or exceed its 7.9 percent clip in the fourth quarter, reducing the likelihood that the nation’s new leadership headed by Xi Jinping will roll out additional measures to support expansion. China’s industry ministry is forecasting a 10 percent rise in factory output this year, unchanged from 2012’s pace.

“Despite the still-tepid external demand, the domestic- driven restocking process is likely to add steam to China’s ongoing recovery in the coming months,” Qu Hongbin, HSBC’s chief China economist in Hong Kong, said in a statement.

The Shanghai Composite Index, the nation’s benchmark stock gauge, rose 0.9 percent as of 10:04 a.m. local time. It had gained 18 percent through yesterday from its 2012 low on Dec. 3.

Fan Gang, a former central bank academic adviser, said in an interview yesterday that the risk of the economy overheating has resurfaced as new regional-government officials try to boost development.

Final Reading

HSBC and Markit will report the final January reading on Feb. 1, the same day that a separate, government-backed purchasing managers’ index will be released. The official gauge showed a third month of expansion in December with a reading of 50.6, unchanged from November.

The HSBC gauge’s preliminary reading, called the Flash PMI, is based on 85 percent to 90 percent of responses to a survey of more than 420 companies. The data for this month’s reading were collected from Jan. 11-22.

Gains in industrial output and retail sales picked up pace in December, a statistics bureau report showed Jan. 18. Industry and construction accounted for about 45 percent of gross domestic product last year, compared with 45 percent for services and 10 percent for agriculture, according to statistics agency data.

Alcoa Inc., the largest U.S. aluminum producer, said Jan. 8 that it sees global demand growth for the commodity recovering to 7 percent in 2013 as China’s economic rebound drives demand for cans, transport and office buildings.

The government has paused from easing monetary policy since July after two interest-rate cuts and three reductions in banks’ reserve-requirement ratio. At the same time, authorities have accelerated investment-project approvals, increased infrastructure spending and cut taxes for small businesses to boost domestic demand and support growth.

Source:businessweek.com


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