Flash PMI report at 6-month high after orders rise

Factory activity in China and Europe signal economic healing but US figure disappoints

PUBLISHED : Tuesday, 24 September, 2013, 12:00am
UPDATED : Tuesday, 24 September, 2013, 3:39am

The mainland's factory sector grew at its fastest pace in six months this month, a preliminary survey showed yesterday, adding momentum to a tentative turnaround in the economy since the middle of the year.

The earliest reading of the economy's performance this month reinforced confidence the government could meet its growth target for this year.

The flash HSBC purchasing managers index (PMI) climbed to 51.2 from last month's 50.1, hitting a high not seen since March. Ten of the 11 sub-indices rose.

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

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

Exports staged a promising comeback this month, 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.

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

Lu said rising stocks of finished goods and raw material purchases suggested companies were replenishing their inventories and driving the spurt in manufacturing.

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

The PMI reading is the latest in a run of better than expected data that suggests the economy is on the mend, including factory output and export figures for last month.

In July and August, there were concerns growth could be slower than the government's target, which would already be the slowest in more than two decades. Now, most analysts believe it will be met.

PMI surveys from the euro zone also showed a welcome pick-up although slower growth in the United States' manufacturing sector backed the Federal Reserve's decision last week to maintain its support for the world's largest economy.

Financial data firm Markit said PMI in the US retreated to 52.8 this month from 53.1 in August, confounding analysts' forecasts of an improvement.

Markit's Eurozone Flash Composite PMI jumped to 52.1 in September from last month's 51.5, its highest since June 2011 and beating expectations for a reading of 51.9. The expansion in the services sector beat all forecasts.