Manufacturing Index Boosts Hope of Soft Landing in China

A Chinese manufacturing index escalated for a second month in September, as a measure of new export orders rebounded to the highest level since May, boosting hopes that the world’s second-largest economy can avoid a hard landing.


A series of interest rate rises, higher reserve requirements for banks and other tightening measures aimed at curbing inflation has raised fears that China may be putting on the brakes too hard, risking an economic recession. 


The Purchasing Managers’ Index published Oct. 1 by the China Federation of Logistics and Purchasing rose for a second month, to 51.2, with new export orders gaining and an inflation measure -- factories’ input costs -- moderating, reports Bloomberg.


The Oct. 1 manufacturing reading was the highest in four months, and a very strong number in the context of the gloomy global outlook.


China’s economy is slowing gradually and the chances of a “hard landing” are small, Bank of America Corp. economist Lu Ting told Bloomberg. At the same time, investors “should also resist being too positive on this PMI reading as the reading of 51.2 might be slightly biased upwards by seasonality,” he warns.


The manufacturing index compiled by the logistics federation and National Bureau of Statistics is based on a survey of purchasing managers at more than 820 companies in 20 industries. It hasn’t fallen below 50 since February 2009.


The data released by the logistics federation and statistics bureau showed that the measure of new export orders rose to 50.9 from 48.3 in August. A gauge of input prices declined to 56.6 from 57.2 and the employment index gained to 51, the highest level since April.



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