China August official manufacturing PMI beats expectation, rises to 51

Leading indicator comes in above expectations, easing fears of a rapid slowdown in growth

PUBLISHED : Sunday, 01 September, 2013, 9:20am
UPDATED : Monday, 02 September, 2013, 1:10am

Factory activity in the mainland expanded at the fastest pace in more than a year in August with a jump in new orders, official data showed yesterday, raising hopes that a rapid slowdown in the world's second-largest economy might have been averted.

The purchasing managers' index (PMI) figure, published by the National Bureau of Statistics, rose to 51 in August from 50.3 in July. That was its highest level since April last year and exceeded market expectations for a 50.6 reading.

A reading above 50 indicates expanding activity, while a reading below 50 points to a contraction.

Beijing has stepped up efforts to prevent a sharp economic slowdown by quickening railway investment and public housing construction and introducing a series of measures to help smaller companies, which could sustain the revival of internal demand.

"We are seeing clearer signs of economic conditions improving," said Haibin Zhu, chief China economist at JP Morgan in Hong Kong.

"One of the reasons is the lagging effect of credit growth earlier in the year, while the second is the recent shift in the policy stance and more concrete policy announcement."

As one of the first leading indicators gauging economic momentum, the improved reading could bode well for other August data, further confirming a stabilising of the economy. The official survey showed an across-the-board recovery in all sub-indices, ranging from new orders and quantity of purchases to input prices and employment, pointing to a positive picture for the vast factory sector.

"The PMI figure showed evident recovery in August, suggesting the economy is further stabilising," Zhang Liqun, an economist at the Development Research Centre, a top government think tank in Beijing, said in a statement accompanying the PMI.

"The improvement in all sub-indices also showed market expectations are turning better and companies are adapting to the changing business environment," he added.

The sub-index measuring new orders rose to 52.4 in August from 50.6 in July, indicating stronger demand for mainland goods. Export orders returned to expansionary territory, rising to 50.2 from 49 in July, suggesting external demand is also up.

A separate PMI survey sponsored by HSBC, which focuses more on small- and medium-sized firms in the private sector, is scheduled to be published today.

Chinese officials have been optimistic about the growth outlook, saying there are clear signs of stabilisation emerging from the economy and that the annual gross domestic product target of 7.5 per cent is achievable.

The mainland economy has slowed for nine out of the past 10 quarters, with GDP growth dipping to 7.5 per cent in the second quarter from 7.7 per cent in the previous three months.