China’s October PMI rises to 55.2%, expansion accelerates

02 November 2009 06:39  [Source: ICIS news]

By Judith Wang

SHANGHAI (ICIS news)--China's manufacturing sector continued to grow in October, supporting the country's ongoing recovery and reflecting an improvement in the fundamentals of chemical firms, analysts said on Monday.

Manufacturing purchasing managers’ index (PMI) in October rose 0.9 percentage points from the September level, a rise for the eighth consecutive month to 55.2%, according to data released by China Federation of Logistics and Purchasing (CFLP) on Sunday.

“The figure in October means the manufacturing industries accelerated the expansion and the index will keep the rising trend in November,” Dong Xian’an, an analyst from Shanghai-based brokerage, Industrial Securities, said in Mandarin.

PMI serves as a barometer for the monthly performance of China’s factories and is based on surveys from purchasing and supply managers at more than 700 manufacturers across the country.

"By looking at the PMI index we can say the fundamentals of chemicals are turning better," Fang Jun, a chemical analyst from Shanghai-based Essence Securities, told ICIS news. "But I think we cannot be too optimistic as the fourth quarter is normally a lull season for the chemicals,” he added.

Sectors like chemical fibre, rubber and plastics products, chemical raw materials and chemical products manufacturing industry, petroleum processing and coke industry, textiles and metal products are among the 20 included in the PMI.

A reading of above 50% suggests economic expansion, while one below 50% indicates contraction, CFLP said.

“After increasing for several months, China’s PMI in October has basically recovered to the level before May 2008, showing China has ironed out the volatilities resulted from the financial crisis and will move towards to a new track with stability and fast development aided by the government's massive stimulus package,” CFLP said in a press release on the website.

Among the 20 sectors of the PMI, the production index in October increased to 59.3%, 1.3 percentage points higher than the September level while the index for new orders rose sharply to 58.5% in October, up 1.7 percentage points from September, CFLP said.

Meanwhile, the index for the new export orders in October was 54.5%, 1.2 percentage points higher than the September level and the import index rose by 2.1 percentage points from September to 52.8%.

“The continual rise of October PMI reflects Chinese economy continues to go in an upward path. Based the import index, domestic demand is expanding. And the rise in the index for the new export orders also shows processing trades will grow fast in the future,” Zhang Liqun, an analyst from CFLP said.

“All of these indexes indicate the economy will continue to grow in the future and economic growth in the fourth quarter will rise above 9.5%,” Zhang said.

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By: Judith Wang
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