China making slow, steady economic recovery: survey

Tue Oct 23, 2012 11:42pm EDT
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By Nick Edwards

BEIJING (Reuters) - China's economy is making a slow, steady recovery from its weakest period of growth in three years, a survey of purchasing managers signaled on Thursday, with new orders and output at their highest in months.

The lackluster nature of the rebound revealed by the HSBC Flash Manufacturing Purchasing Managers Index (PMI) though comes in its headline reading of 49.1 points for October - a three month high, but still below the 50-point mark that separates expanding from shrinking business activity.

In the world's second biggest economy where industrial output expanded at a 9.2 percent annual rate in September, it implies that while China's factories are growing, they are doing so more slowly than previously.

"Markets may be disappointed to realize that the Chinese recovery will be gradual and no new stimulus is forthcoming," Dariusz Kowalczyk, senior economist and strategist at Credit Agricole CIB in Hong Kong, said in a note to clients.

The flash PMI is the first indicator of real economic activity since official data last week showed GDP growth fell below target in Q3 - its lowest since Q1 2009 - despite signs of strength in September. The survey captures data mainly from smaller, export-oriented manufacturers in China's private sector.

The uptick in the headline PMI index, along with rises in new orders and output - its two biggest sub-components - and broad improvement in export orders, inventories and prices charged, all signal that a year's worth of pro-growth, fine turning of economic policy in China is gaining traction.

The new orders sub-index hit a six-month high, with stocks of purchases at their strongest since July and stocks of finished goods at their weakest since March.

That implies an upturn in orders will be met by a rise in production, handily confirmed by a rally to a three-month high in the PMI's output sub-index.   Continued...