China HSBC PMI hits six-month high as demand rebounds

Mon Sep 23, 2013 12:55am EDT
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BEIJING (Reuters) - China's factory sector grew at its fastest pace in six months in September, a preliminary survey showed on Monday, adding momentum to a tentative turnaround in the world's second-largest economy since the middle of the year.

The earliest reading of China's economic performance in September reinforced confidence the government could meet its growth target for this year, and boosted Asian stocks as investors hoped it was a precursor of more goods news.

The flash HSBC Purchasing Managers' Index (PMI) climbed to 51.2 from August's 50.1, hitting a high not seen since March, with 10 of 11 sub-indices rising in September.

"Given the current growth momentum, the Chinese government should be able to achieve its 7.5 percent growth target," said Ting Lu, an economist at Bank of America-Merrill Lynch.

After cooling in 12 of the last 14 quarters, the economy finally looks to be stabilizing, though some analysts are concerned the jump in activity is being fuelled by excess credit and investment.

Exports staged a promising comeback in September, the PMI showed, with new export orders jumping 3.6 points to a 10-month peak of 50.8. It was the first time in six months that export orders were above 50 points, the level that indicates expansion.

Encouragingly, domestic demand also showed resilience, with new orders rising to a five-month high.

Lu from Bank of America-Merrill Lynch said rising stocks of finished goods and raw material purchases suggested companies were replenishing inventories and driving the spurt in manufacturing.

"Good data since August means that markets should not expect a big stimulus package," he said, adding authorities were likely to continue supporting growth at the margins by raising spending on railway and public housing construction.   Continued...