China's manufacturing sector expanded at the fastest pace in 18 months in October as demand from both overseas and at home grew quickly, an industry survey showed today, pointing to sustained strength for the sector.
HSBC's China Purchasing Managers' Index (PMI) rose to 55.4 from 55.0 in September, marking the seventh month in a row that the index, compiled by British research firm Markit, has been above the watershed of 50 that divides expansion and contraction.
The improvement in the reading essentially mirrored that of the PMI produced for the National Bureau of Statistics, released on Sunday, which also rose to an 18-month high in part on the back of strong export orders.
Together, the reports presented a picture of robust growth for the vast sector, helping support a rebound in oil prices above $77 a barrel despite ongoing concerns over the outlook for the US economy.
"We believe the ongoing strong recovery in the manufacturing sector should gain further momentum in the coming months, hence underpinning strong economic growth in the fourth quarter," Qu Hongbin, chief China economist with HSBC in Hong Kong, said in a statement.
Employment rose at the sharpest rate in the history of the HSBC survey, which goes back to April 2004 and is designed to provide a timely snapshot of business conditions in industry, boding well for future domestic consumption.
Export orders hit a 28-month high and pre-production inventories rose for the first time since July 2007, offering evidence that growth is starting to find broader footing.
All told, the two surveys point to an acceleration in annual gross domestic product growth to double digits in the fourth quarter, up from 8.9 per cent in the third quarter, said Wensheng Peng and Jian Chang with Barclays Capital in Hong Kong.
Reuters