Tue, Jan 05, 2010 - Page 12 News List

Manufacturing on the up: HSBC

ECONOMIC ENGINE ROOMWhile the bank’s survey showed the sector was doing well, it also said that both input and output prices were rising at historically high rates

By Ted Yang  /  STAFF REPORTER

The purchasing managers’ index (PMI) rose to 58.7 last month, slightly up from 58.4 in November, an indication that the domestic manufacturing sector is rebounding steadily from the economic slump, a survey released by HSBC showed yesterday.

The survey said, however, that while growth in the manufacturing sector was sustained for the 10th consecutive month, inflationary pressure continued to build, causing both input and output prices to rise at historically high rates.

Output prices reportedly rose robustly last month to an all-time high of nearly 55, the survey said, adding that the rise was linked to a continued increase in the cost of raw materials.

SUPPLY SHORTAGE

Input cost inflation accelerated last month to a level of more than 70, the second-fastest rate in recorded history, because of a shortage in the supply of certain raw materials, the survey said.

A score above 50 indicates expansion, while a value lower signifies deterioration.

Frederic Neumann, Senior Asian Economist at HSBC, said in the report that although overall new orders slowed slightly last month, new export orders accelerated again, which underlined the continued strength in global demand for electronics.

The survey said that incoming new business received from overseas increased substantially last month, with the new export orders index recording more than 60, the second-highest in the eight-month period of sustained expansion.

The ongoing strengthening of the global economy boosted demand, the survey said, noting that new orders from the US, Europe, China and Japan grew last month.

NEW ORDERS

The new orders index posted above the 50 no-change threshold last month, slightly lower than November’s reading, the survey showed, but the increase in new order volumes was substantial and marked the ninth consecutive month of expansion in new business.

The survey said an easing in the growth of new orders last month reflected a weaker contribution from the domestic market as new export orders grew at a faster pace when compared with the previous month.

Meanwhile, as manufacturers strive to boost their production capacity, employment in the manufacturing sector increased to more than 55 last month, the largest month-on-month growth in 23 months, the survey showed.

MORE JOBS

Employment has increased because there are insufficient personnel to meet expected production requirements, the survey said.

Neumann said strong employment growth suggests that domestic demand would remain well supported over the first half of this year, lending a further boost to the recovery.

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