Activity in China’s huge factory sector expanded at the fastest pace in 27 months last month, while industry surveys across Asia showed a pick-up in export orders that hinted at a long-awaited revival in global trade.
China’s official manufacturing purchasing managers’ index (PMI) rose to 51.7 last month — the strongest since April 2012 and up from 51 in June, China’s National Bureau of Statistics said yesterday. Economists had predicted a reading of 51.4.
The upbeat result was echoed in the HSBC/Markit Flash China Manufacturing Purchasing Managers’ Index, which climbed to an 18-month high of 51.7, from June’s 50.7. Anything above 50 in these surveys separates growth from contraction.
Photo: AFP
The reports added to evidence that Beijing’s stimulus measures are gaining traction in the world’s second-largest economy, and followed news that growth in the US had rebounded from a winter lull.
“Taken literally, these PMIs signal an exceptionally strong start for third quarter growth in China,” said Annette Beacher, head of Asia-Pacific research at TD Securities in Singapore.
“Each time the PMIs have printed around 51 to 52 in recent years, annual economic growth peaked at around 8 percent in the same quarter, and so we pencil that in as a starting point,” she said.
China was not alone in expecting better times ahead.
India’s factory activity expanded at its fastest pace in 17 months last month as firms responded to burgeoning new orders by increasing output.
The HSBC PMI, compiled by Markit, rose to 53 from 51.5 in June, its highest since February last year.
“A flood of new orders from both domestic and external sources has led to a surge in activity,” said Frederic Neumann, co-head of Asian economic research at HSBC. “Details within the survey show that all monitored categories witnessed a rise in output and order flows.”
Adding to the promising omens for global trade, South Korea reported exports to the US expanded by over 19 percent last month, the fastest rate in nine months.
Taiwanese manufacturers, who do much of the work on Apple Inc’s iPhones, reported a robust improvement in overall business conditions last month, with output, total new orders and new export orders rising sharply.
All of which helped offset a disappointing reading from Japan, which has been struggling to recover from a tax-induced slump in consumer spending.
The final Markit/JMMA Japan Flash Manufacturing Purchasing Managers’ Index fell to a seasonally adjusted 50.5 last month, from a preliminary reading of 50.8 and a final 51.5 in June. In a positive sign, new export orders grew for the first time in four months, albeit modestly.
Policymakers had been counting on an export rebound to help ease the pain from the sales tax hike, but shipments have been stubbornly weak.
For global financial markets, the quickening pulse in Asian trade was a welcome diversion from conflict in the Middle East and Ukraine, as well as Argentina’s latest brush with a default.
The US factory survey from the Institute for Supply Management which was due to be released yesterday, is also expected to pick up to 56 for last month, which would be the best reading so far this year.
It is to be preceded by the influential US payrolls report for last month which analysts expect is set to show another healthy gain of 233,000 net new jobs. The unemployment rate is seen holding at 6.1 percent, which might be welcomed by investors worried that further tightening in the labor market might lead the US Federal Reserve to lift interest rates earlier than otherwise.
Those concerns were inflamed on Thursday when data showed US labor costs rose by the most in more than five-and-a-half years during the second quarter.
The data was also partially blamed for a sell-off on Wall Street that saw the broad-based S&P 500 suffer its biggest daily loss since April.
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