China manufacturing grows at fastest pace in over 5 years
BEIJING (Reuters) – China’s manufacturing activity grew at the fastest pace since 2012 in September as factories cranked up output to take advantage of strong demand and high prices, easing worries of a slowdown before a key political meeting next month.
Production, total new orders and output prices all improved to the highest level in at least a year, while a pick-up in a reading for the construction sector indicated a building boom is undiminished.
The official Purchasing Managers’ Index (PMI) released on Saturday rose to 52.4 in September, from 51.7 in August and well above the 50-point mark that separates growth from contraction on a monthly basis.
It marked the 14th straight month of expansion for China's massive manufacturing industry and the highest reading since April 2012. Analysts surveyed by Reuters had forecast the reading would ease slightly.
The data comes ahead of the Communist Party Congress in mid-October, a once-everyfive-years meeting where new leaders are appointed and the government’s key political and economic initiatives are laid out, though details are usually not announced until much later.
China’s manufacturers are reporting their best profits in years, fuelled by governmentled infrastructure spending, a strong housing market, higher factory-gate prices and a recovery in exports.
“Over the short term, we believe the resilient demand growth and disciplined balance sheet expansion ... will point to further improvement in manufacturing profitability and investment returns,” analysts at China International Capital Corp. said in a note after the data.
But cost pressures from high raw materials prices and continued underperformance of smaller firms mean some manufacturers are still struggling.
“Mid- and downstream industries are worried about a further increase in cost pressures,” National Bureau of Statistics official Zhao Qinghe wrote in comments published with the data.
The latest survey showed input prices continued to rise at a solid clip, with the reading at 68.4 compared with 65.3 in August, benefiting upstream producers such as miners, smelters and oil refiners.
Indexes for raw materials prices in the paper, wood processing and furniture, and chemical products manufacturing industries were all above 75, said Zhao, indicating large price increases.
Output prices also rose but at a slower pace, pointing to lower profit margins for companies further along the supply chain who are unable to pass on all of the price increases to their customers.
A separate PMI on the steel industry fell to 53.7 in September from 57.2 in August but remained in solid expansion territory, as the industry faces production restrictions aimed at reducing choking air pollution over the winter.