Manufacturing on move as slowdown fears ease

09:02, April 02, 2011      

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Chinese manufacturing grew faster in March for the first time in four months.

However, analysts warned that the pace may slow again due to the ripple effect of Japan's earthquake and nuclear crises.

The Purchasing Managers' Index, a gauge of industrial activities across the country, increased 1.2 percentage points from a month earlier to 53.4 percent in March, the China Federation of Logistics and Purchasing said yesterday. A reading above 50 percent points to expansion.

The rise ended a three-month decline that was attributed to China's tightening monetary policies.

"This rebound shows the continued strength of China's resilient economy," said Yao Wei, an economist at Societe Generale.

First quarter

To minimize monthly seasonality, Yao suggested market watchers look at the first quarter as a whole. The PMI averaged 52.8 percent in the first three months, which indicated that gross domestic product may have grown at between 9.5 percent and 9.7 percent in March, Yao said.

Another encouraging sign was the component input price index, an indicator of future inflation, which decelerated for the first time in four months. It stood at 68.3 percent in March, still comparatively high but down 1.8 percentage points from that in February, thanks to China's tightening monetary policies.

Alex Malley, chief executive officer of accounting firm CPA Australia, said inflation was not necessarily a bad thing, the key was how to manage it.

"Inflation indicates the energy of an economy," Malley said yesterday in Shanghai. "Policy-makers can use more tightening measures to contain inflation and make it helpful for a healthy economic growth."

The acceleration of manufacturing activity was also mirrored in the HSBC China Manufacturing Purchasing Managers' Index, which rose to 51.8 in March from February's 51.7.

"The March HSBC manufacturing PMI confirms that the pace of manufacturing expansion has stabilized after slowing in February," said Qu Hongbin, an economist at HSBC.

"This implies economic growth is only moderating rather than slowing too much. More importantly, price hikes also start to slow. All these confirm our view that quantitative tightening is working."

While the official PMI is weighted heavily toward big domestic companies, the HSBC survey is slanted more toward private and export-oriented firms.

China's industrial production expanded 14.1 percent from a year earlier in the first two months, up 0.6 percentage points from December, according to the National Bureau of Statistics. It was bolstered by more output in machinery, transport equipment and non-metal mineral products.

However, the pace of acceleration may slow or even come to a halt this month, because of the disasters in Japan, an important trading partner of China, analysts said.

Source: Shanghai Daily
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