THE country s factories ramped up their production last month and were buoyed by an influx of new business, highlighting the strength of the world s second-largest economy but also pointing to price pressures.
Two surveys of the manufacturing sector, which are designed to provide an early indication of conditions in a broad range of industries, both jumped to six-month highs in October.
The official purchasing managers index (PMI) rose to 54.7 in the month from 53.8 in September, blowing past expectations. The HSBC PMI, a private companion, climbed to 54.8 from 52.9.
The increase was all the more impressive since the official survey has traditionally sagged in October, weighed down by the week-long National Day holiday, when factory production slows.
The fact that the PMI went up despite this seasonal bias suggests real activity growth was likely to have been exceedingly strong in October, Goldman Sachs economists Yu Song and Helen Qiao said.
Four straight months of stronger official PMIs jive with other signs that China s economy has built up a head of steam.
This momentum gave the government the confidence to raise interest rates Oct. 19 for the first time in nearly three years, and some economists believe another increase could be in store before the end of the year.
But Zhang Liqun, a government researcher, cautioned against over-optimism, saying that growth was likely to ease and that inflationary pressures were a concern.
The continued pick-up in the October PMI shows that the trend of economic stabilization is becoming clearer. However, we need to note that economic expansion might slow in the future as investment and export growth both slowed in the third quarter, he said in a comment on behalf of the logistics federation, which compiles the index for the National Bureau of Statistics.
Input prices climbed fast, meaning rising cost pressure for companies. We need to pay close attention to the economic trend and must not be over-optimistic, he said.
Input prices rose to a six-month high of 69.9 from 65.3 in September.
China reports inflation data for October next week. Many economists expect that consumer prices will have risen to a nearly two-year high, though that could be at their cyclical peak.
Manufacturing executives pointed to higher raw material costs especially, coal, cotton, grain and steel and said that they had increased output prices to protect their operating margins.
(SD-Agencies)
