China manufacturing gains strength despite share gloom
Written on September 2, 2009
China’s vast manufacturing sector kept up its steady recovery last month, ignoring the gloom engulfing the Shanghai stock market, a pair of surveys showed on Tuesday.
The two indexes, compiled from polls of executives charged with purchasing materials, rose to a 16-month high as companies continued to benefit from the stimulus imparted by a 4 trillion yuan ($585 billion) government spending program.
Markets took heart from the signs of continued recovery in the world’s third-largest economy.
Chinese shares closed up 0.6 percent, feeding into gains elsewhere in Asia, while U.S. crude oil futures clawed back above $70 per barrel after falling by 4 percent overnight on fears that China’s growth was moderating.
“China’s equity market has taken a battering in the last few weeks, but the economic data suggests that the recovery remains on track,” said Brian Jackson, a strategist with Royal Bank of Canada in Hong Kong.
The purchasing managers’ index (PMI) compiled by the China Federation of Logistics and Purchasing (CFLP) rose to a 16-month high in August of 54.0 from 53.3 in July as output, new orders, imports and employment all showed strength.
A separate PMI, compiled by British research firm Markit and published by HSBC, jumped to 55.1 from 52.8 in July. The improvement was also driven by output and new orders.
The indexes are designed to give a timely snapshot of business conditions payday loan. A reading above the watershed of 50 indicates that activity is expanding; one below 50 suggests contraction.
The official survey has now been above this boom-bust line for six months, and the HSBC PMI has been in positive territory for five months.
“The slight increase in August PMI’s shows that China’s economy is maintaining upward momentum,” Zhang Liqun, an economist at the Development Research Center, a think-tank under China’s cabinet, said in a comment for the logistics federation.
To see a graphic on China’s industrial output and PMI trends, click: here
GOOD, NOT GREAT
The reading compared with a record low of 38.8 plumbed in November when the economy was slumping due to a collapse in external demand and a downturn in the domestic property market.
“The Chinese manufacturing sector is likely to see further improvements in the coming months, adding fuel to overall growth recovery,” Qu Hongbin, chief China economist with HSBC in Hong Kong, said in a statement.
The stream of good — though not spectacular — economic news out of China lately has not prevented a fierce sell-off in Shanghai stocks.
Filed in: technology.