China’s factory and services sectors had their best showings in months last month as demand rebounded, surveys showed, fueling optimism that its economy may be steadying after a weak start to the year.
“Exports are picking up and the impact of the ‘mini stimulus’ is gradually being felt,” UBS economist Wang Tao (汪濤) said, referring to recent government measures to revive growth. “We expect this to last in the second and third quarters.”
The final HSBC-Markit purchasing managers’ index (PMI) rose to 49.4 last month, a four-month high and compared to April’s 48.1.
Though the final reading was still under the 50-point level that separates growth in activity from contraction, the improvement nonetheless stirred hopes that the economy is working its way through its prolonged soft patch.
The buoyancy was mirrored by a similar acceleration in growth in the services sector, where a government-released PMI climbed to a six-month high of 55.5, from April’s 54.8.
A breakdown of PMIs showed domestic and foreign demand is looking up for China.
The services PMI, a barometer for the health of the economy, showed new orders jumped to an eight-month high of 52.7 last month, compared to April’s 50.8.
Companies also retained their confidence, with business expectations holding ground at a solid 60.7, compared to April’s 61.5.
In the HSBC PMI poll, a turnaround in an export indicator was even more dramatic. The new export orders subindex leapt to a four-year high of 53.2 last month from April’s 48.9
“The economy is stabilizing, but it is too early to say that it has bottomed out, particularly in light of a weaker property sector,” said Qu Hongbin (屈宏斌), chief economist for China at HSBC.
Elsewhere in Asia, both Indian and Australian central banks kept their interest rates unchanged yesterday, while South Korea’s inflation rate rose 1.7 percent last month from a year earlier.
India’s hawkish central bank kept key interest rates unchanged yesterday at its first meeting to set monetary policy since new pro-growth Indian Prime Minister Narendra Modi took office.
After meeting in the financial capital Mumbai, the Reserve Bank of India (RBI) said the benchmark repo rate, at which it lends to commercial banks, would remain steady at 8 percent.
Indian central bank Governor Raghuram Rajan said that if the Indian economy stays on its disinflationary course, “further policy tightening will not be warranted.”
“If disinflation, adjusting for base effects, is faster than currently anticipated, it will provide headroom for an easing of the policy stance,” the former IMF chief economist added.
Rajan has hiked interest rates three times since taking the helm September last year.
Australia’s central bank also left interest rates on hold at a record low 2.5 percent as it sounded a cautiously optimistic note on the economy’s transition away from mining-led growth.
Australia’s Reserve Bank continued to flag a period of unchanged rates in a statement that balanced a more positive outlook for the labor market and for firms’ spending plans with a warning that a sharp fall-off in mining investment was still to come.
“In the board’s judgement, monetary policy is appropriately configured to foster sustainable growth in demand and inflation outcomes consistent with the target,” Governor Glenn Stevens said. “On present indications, the most prudent course is likely to be a period of stability in interest rates.”
It was the ninth consecutive board meeting where rates remained on hold.
In Seoul, South Korea’s inflation rate rose at the fastest pace for more than a year last month, on the back of higher utility costs, state data showed yesterday.
The consumer price index rose 1.7 percent from a year ago — the highest increase for 19 months — and was up 0.2 percent from April, according to Statistics Korea.
The core inflation rate, excluding volatile oil and food prices, climbed 2.2 percent on year and rose 0.3 percent on month.
The Bank of Korea has forecast an inflation rate of 2.1 percent for this year, following a 1.3 percent increase last year — the slowest in 14 years.
The central bank has held its key policy rate at 2.5 percent since May last year.
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