China’s manufacturing improved in the month of October as output and new orders increased. Data, which was published on the 1st of November, showed that the world’s second-largest economy might be recovering from the slowest pace of growth in almost three years.
China Manufacturing PMI rises
On the 1st of November, the China Federation of Logistics and Purchasing released a monthly purchasing managers’ index (PMI). According to the federation’s findings, the China’s Purchasing Managers’ Index (PMI) grew to 50.2 in October from 49.8 in September on a 100-point scale. A score above 50 shows an expansion in activity, while the score below is a sign of a contraction. In addition, it is the first time that China has seen a growth in new orders since April.
Without a doubt, the China’s PMI for October is good news not only for the Chinese economy, but also for the world economy, which has significantly slowed down due to European debt crisis and stagnation of the U.S. economy as well. Moreover the China’s PMI for October seems to be the sign of acceleration in expansion this quarter after Chinese industrial production and retail sales rose in the month of September. After data was released Shanghai’s benchmark stock index grew the most in almost three weeks.
Hongbin Qu, an analyst with HSBC, believes that the China’s PMI for Octobers came after “a modest pickup” in September. In addition, he stated: “We expect a continuation of policy easing to further boost domestic demand and counterbalance the external weakness, leading to a gradual growth recovery in the coming quarters.”
The findings of China Federation of Logistics and Purchasing’s report on China’s PMI for October may reduce pressure on the government to implement more stimulus measures. Joy Yang, an economist at Mirae Asset Securities, is strongly convinced that no interest-rate cut will be introduced in the nearest future as the steps taken by the China’s government were enough to wake up the growth once again.
Certainly the findings brought optimistic news in particular to Chinese key decision makers as the congress of the Communist Party of China, which will unveil the new leader of the People’s Republic of China, is due to start just next week.
The end of China’s slowdown
In the third quarter China’s economy slowed down for seventh straight quarter. Data showed that China’s economy grew only 7.4 percent in the period and it was the slowest pace in three years. China’s manufacturing activity saw a drop in August in September.
The China PMI for October indicates that economic momentum has accelerated. Analysts believe that the steps taken by the government regarding increasing infrastructure spending and monetary easing have just started bringing positive effects.
It is worth mentioning that other official data, which indicated a recovery of China’s economy, showed a growth in exports, retail sales and industrial production as well. Yet analyst have underlined that a recovery in China’s economy seems to be “L-shaped”, which implies that the decrease might have stopped, but at the same time improvements are likely to be gradual.