Growth in China and India powered ahead last month, providing welcome support for the global economy at a time of sluggishness in the US and most of Europe and a faltering in Japan’s recovery.
Two surveys of Chinese executives showed broad-based strength in the manufacturing sector of the world’s second-largest economy and helped boost Asian shares outside Japan by 1.7 percent.
The official purchasing managers’ index (PMI) rose to a six-month high last mont of 54.7 from 53.8 in September, easily beating market forecasts of 52.9.
A figure above 50 denotes expansion; a reading below 50 indicates contraction.
The strength of the official PMI was especially striking because the index normally heads down in October, said Yu Song (宋玉) and Helen Qiao (喬虹), economists at Goldman Sachs Group Inc.
“The fact that the PMI went up despite this seasonal bias suggests real activity growth was likely to have been exceedingly strong in October,” they said in a note.
The survey showed that manufacturers continued to run down stocks last month to meet rising domestic orders, which Ting Lu (陸挺) with Bank of America--Merrill Lynch said was a reflection of strength in construction and consumption.
“These readings bode well for a recovery of output in coming months,” Lu told clients.
A companion PMI produced by Markit Group Ltd for HSBC Holdings PLC painted a similar picture, rising to 54.8 from 52.9 — one of the largest month-on-month rises in the history of the survey.
Calling the official PMI one of the best leading indicators of the economy, Lu said last month’s report supported his forecast of 9.3 percent year-on-year growth in GDP in the fourth quarter and 10.3 percent for all of this year.
In contrast, the US reported on Friday that its economy grew at a tepid 2 percent rate in the third quarter, reinforcing expectations that the US Federal Reserve will agree this week to ease monetary policy by embarking on a new program of bond purchases.
The HSBC-Markit PMI for India, Asia’s third-largest economy, rose to 57.2 last month from 55.1 in September.
“The manufacturing sector remains supported by strong local consumption growth and growing employment suggests that domestic demand will remain robust,” Frederic Neumann, co-head of Asian Economics Research at HSBC, said in a statement.
However, not all the economic news from Asia was rosy.
The South Korean manufacturing sector shrank for the second month in a row as the HSBC-Markit PMI fell to 46.7 last month, the lowest since February last year, from 48.8 in September.
New export orders also fell below the boom-bust line of 50 for the first time since February last year.
However, actual exports from Asia’s fourth-largest economy rose 29.9 percent last month from the same month last year.
That surpassed the 21.9 percent increase economists had expected and boosted investor confidence in the export-dependent economy. Shares in South Korea’s top automakers shot to record highs, while the won rallied against the US dollar.
“It bodes well for the economy and solid overseas demand will continue to be a major driver for economic growth,” said So Jae-yong, an economist at Hana Daetoo Securities Co Ltd in Seoul.
Together with a jump in inflation to a 20-month high of 4.1 percent in the year to last month, the data also strengthened the case for a rise in interest rates this month.
South Korea’s PMI mirrored that for Japan, released on Friday, which showed that manufacturing contracted for a second consecutive month as slowing demand and a rising yen led to the first drop in export orders in more than a year.
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