PMI sees growth bounce back

09:09, September 02, 2010      

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The country's manufacturing sector saw accelerated growth in August, ending a three-month long moderation.

The official purchasing managers' index (PMI) co-compiled by the National Bureau of Statistics (NBS) and the China Federation of Logistics and Purchasing (CFLP) registered 51.7 in August, remaining above the expansion-contraction line of 50 for 18 consecutive months, the CFLP announced Wednesday. The PMI reading hit a 17-month low of 51.2 in July, after a decline for the third consecutive month.

Six sub-indexes saw a rise in August compared to the previous month. Finished goods inventory was down, indicating a demand revival.

Analysts attributed the rebound from July to August mainly to seasonality, because the reading never has fallen between the two summer months since it was released in 2005. However, they still gained confidence from the reading.

"Overall, we believe the PMI shows that manufacturing sector activity accelerated modestly in August and that the expansion in manufacturing activity is likely to continue in the months ahead," economists Tomo Kinoshita and Sun Chi with Nomura Securities said in a research note Wednesday.

The rebounding PMI, growth in investment, retail sales and exports suggest that the economy won't slip back into recession, CFLP analyst Zhang Liqun told the Global Times. The economy is moderating from rapid growth to more sustainable growth at slower pace, Zhang said.

The HSBC PMI reading released Wednesday also rose to a three-month high of 51.9 in August, returning to expansionary territory from July's 49.4.

"The rebound may make policy-making departments feel okay about the current tightening policies, posing risks of a delay in the transition to policies that secure economic growth," warned Lu Zhengwei, a senior economist with the Industrial Bank of China.

There are also concerns that the official PMI after adjusting for seasonality actually indicated a remaining weak growth in manufacturing activity.

If industrial production data, due to be released by NBS September 13, confirms the continued weakness as suggested by the PMI data, there will be more downside risks to their 10.1 percent 2010 GDP growth forecast, Goldman Sachs economists Song Yu and Qiao Hong wrote in a note Wednesday.

The input price component that saw a sharp jump of 10.1 points to 60.5 in August is likely to translate into a rebound in producer price index inflation, they wrote.

Source: Global Times


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