Bloomberg News

China Manufacturing Index Rises for Second Month on Exports

October 01, 2011

(Updates with comment from economist in fourth paragraph.)

Oct. 1 (Bloomberg) -- A Chinese manufacturing index advanced for the second month in September, driven by an increase in new export orders.

The Purchasing Managers’ Index was at 51.2, compared with 50.9 in August, the China Federation of Logistics and Purchasing said in a statement today. The median estimate in a Bloomberg News survey of 13 economists was for a reading of 51.1. A level above 50 indicates expansion.

Today’s report suggests the world’s second-largest economy is weathering Premier Wen Jiabao’s campaign to cool inflation that has included higher interest rates, lending curbs and home- purchase limits. Room for further tightening may be limited by a heightened risk of recession in the U.S. and euro-area economies and the impact of that on Chinese exports.

“September’s PMI should provide some support to global investor confidence, if only at the margin,” said Alistair Thornton, a Beijing-based economist at IHS Global Insight. “It is clear that despite the policy-driven slowdown and weakening eternal climate, there remains significant momentum in the economy.”

The manufacturing index compiled by the logistics federation and National Bureau of Statistics is based on a survey of purchasing managers in more than 820 companies in 20 industries. It hasn’t fallen below 50 since February 2009.

In contrast, a separate manufacturing index released yesterday by HSBC Holdings Plc and Markit Economics indicated a third straight month of contraction.

HSBC PMI

HSBC’s index, which reflects a survey of more than 400 companies, is weighted toward small businesses that have been hit harder by the government’s tightening measures, according to economists including Bank of America Corp.’s Lu Ting and Australia and New Zealand Banking Group Ltd.’s Liu Li-Gang. The official PMI has a greater focus on larger enterprises, they say.

China’s benchmark Shanghai Composite Index fell yesterday to its lowest close since April 2009 on concerns that the nation’s growth is slowing and Greece may default on its debt. The gauge sank 15 percent in the July-to-September period, the biggest drop since the second quarter of 2010.

Fifty-nine percent of respondents in the quarterly Bloomberg Global Poll of investors, analysts and traders who are Bloomberg subscribers said economic growth in China may decline to less than 5 percent annually by 2016. Growth was 9.5 percent in the second quarter.

Input Prices

The data released today by the logistics federation and statistics bureau showed that the measure of new export orders climbed to 50.9 from 48.3 in August. A gauge of input prices declined to 56.6 from 57.2.

“Good news is that export orders rebounded to above 50 and the input price index declined,” said Shen Jianguang, chief Greater China economist for Mizuho Securities Asia Ltd. Economic growth may slow to 9 percent on year in the third quarter, with the possibility of a “hard landing” still “unlikely,” said Sheng, who has also worked for institutions including the International Monetary Fund and the European Central Bank.

Premier Wen, speaking at a banquet late yesterday in Beijing marking the weeklong National Day holiday that celebrates the start of Communist rule in China six decades ago, said the relatively fast increases in the nation’s consumer prices had been controlled. The government aims to keep consumer prices basically stable and to further implement property control measures and policies for the construction of social housing projects, he said.

Inflation in China rose to a three-year high in July before moderating in August. The People’s Bank of China has raised interest rates five times and increased the reserve requirement nine times in the past 12 months to rein in consumer prices.

The statistics bureau is scheduled to release inflation data for September on Oct. 14 and gross domestic product figures for the third quarter on Oct. 18.

--Victoria Ruan, with assistance from Jessica Zhou and Michael Forsythe in Beijing and Marco Lui in Hong Kong. Editors: John Liu, Terje Langeland

To contact Bloomberg News staff for this story: Victoria Ruan in Beijing at vruan1@bloomberg.net

To contact the editor responsible for this story: Paul Panckhurst at ppanckhurst@bloomberg.net


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