China preliminary PMI hits 14-month high


Sat, Dec 15, 2012 - Page 15

China’s manufacturing activity hit a 14-month high this month, a further sign of a rebound in the world’s No. 2 economy as domestic demand improved despite external weakness, HSBC said yesterday.

The preliminary purchasing managers’ index (PMI) released by the British banking giant hit 50.9 this month, up from a final 50.5 in November, when the figure returned to growth after 12 consecutive months of contraction.

A reading above 50 indicates expansion, 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 reading is the highest since October last year, when the figure was 51, according to HSBC data.

Shares in Hong Kong closed up 0.71 percent, or 160.4 points, at 22,605.98 yesterday, while Shanghai surged 4.32 percent, or 89.15 points, to 2,150.63.

China’s economic growth hit a more than three-year low of 7.4 percent in the three months to September, but recent data reflecting domestic conditions, including industrial output and retail sales, has fueled optimism that the worst is over.

However, exports, which rose just 2.9 percent year-on-year to US$179.4 billion last month, came in much lower than market expectations, fanning concerns on the sustainability of the recovery.

Qu Hongbin (屈宏斌), a Hong Kong-based economist with HSBC, said the PMI figure “confirmed that China’s ongoing growth recovery is gaining momentum, mainly driven by domestic demand conditions”.

“However, the drop of new export orders and the downside surprise of November exports growth suggest persisting external headwinds,” he said, adding Beijing was expected to keep policy loose to offset such impacts.

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.

The country’s top leadership is expected to hold a key annual meeting today and tomorrow that will lay out major economic policies and goals for next year, Chinese media reported earlier this week.

The preliminary PMI is based on approximately 85 to 90 percent of total PMI survey responses each month, HSBC said, adding that the month’s final reading will be released on Dec. 31.