China factory activity up for first time in sour months in August: survey

Sun Sep 1, 2013 10:53pm EDT
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BEIJING (Reuters) - China's factory activity expanded for the first time in four months in August as domestic demand rebounded, a private survey showed on Monday, the latest sign that the world's second-largest economy may have avoided a sharp slowdown.

The final Markit/HSBC Purchasing Managers' Index (PMI) climbed to 50.1 in August, up sharply from July's 47.7 and in line with last week's flash preliminary reading.

The survey came a day after China's official manufacturing PMI showed factory activity expanded at the fastest pace in more than a year in August with a jump in new orders.

Economists cheered the upbeat data as a sign that China's economy, which has cooled in 12 of the last 14 quarters, is finally steadying.

"We are definitely stabilizing, but it's going to be a pretty weak to flat recovery," said Stephen Green, an economist at Standard Chartered.

Asian shares climbed to a two-week high and the Australian dollar and copper gained after the report. <MKTS/GLOB>

Modest growth in China's factories should still comfort financial markets, however, offering hope that a run of encouraging data in July was not a fluke.

The official PMI, which came in at 51.0 versus expectations for 50.6, is more weighted towards bigger and state-owned firms, which have easier access to credit and the scale to cope better with downturns than the smaller private firms that form the backbone of the Markit/HSBC survey.

As recently as a month ago, investors had worried that China's economy was slipping into a deeper-than-expected downturn, especially after its money market was hit by an unprecedented cash crunch in June.   Continued...

A worker cuts crude steel on a production line at a steel factory in Ganyu, Jiangsu province July 11, 2013. REUTERS/China Daily