China’s manufacturing activity grew this month for the first time in 13 months, HSBC said yesterday, in a further sign of strength in the world’s second-largest economy after a marked slowdown.
The preliminary purchasing managers’ index (PMI) released by the British banking giant hit 50.4 this month, up from a final 49.5 last month, after 12 consecutive months in negative territory.
A reading above 50 indicates growth in the key sector, while one below signals contraction.
The index, compiled by information services provider Markit and released by HSBC, tracks manufacturing activity and is a closely watched barometer of the health of the economy.
This month’s figure was the first time since October last year that the indicator showed expansion and suggested a revving up in China’s economy, where growth has slowed for seven straight quarters.
It comes after China’s official PMI rose, announced earlier this month, rose to 50.2 last month from 49.8 in September for the first expansion in three months.
“This confirms that the economic recovery continues to gain momentum towards the year end,” HSBC’s chief economist for China,Qu Hongbin (屈宏斌), said in the bank’s release announcing the figure. “However, it is still the early stage of recovery and global economic growth remains fragile. This calls for a continuation of policy easing to strengthen the recovery.”
China’s economic growth hit a more than three-year low of 7.4 percent in the three months to September, but recent data has fueled optimism that the worst is over.
Exports, industrial production, retail sales and fixed asset investment — a key gauge of infrastructure spending — have all shown improvement, after authorities have cut interest rates twice this year and have also reduced the amount of funds banks must keep in reserve three times since December last year to encourage lending.
JPMorgan economists Zhu Haibin (朱海斌) and Grace Ng (吳向紅) said that the result of the preliminary PMI this month was due to positive effects from Beijing’s efforts to boost growth.
However, they cautioned that the external outlook is still a cause for concern.
“Global demand conditions going into early next year remain uncertain,” they wrote in a research note.
The possibility of automatic spending cuts and tax increases in the US — the so-called fiscal cliff — and the eurozone’s ongoing debt problems “remain key risk factors in China’s road to economic recovery going into next year,” they said.
HSBC said it would release its final PMI data for this month on Dec. 3. China’s official PMI for this month comes out on Dec. 1.