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China Manufacturing Index Beats Estimates as Output Rises
By Bloomberg News - Nov 30, 2013
A Chinese manufacturing gauge exceeded analysts’ estimates (CPMINDX) in November, indicating the nation’s economic recovery is sustaining momentum amid government efforts to rein in credit growth.
The Purchasing Managers’ Index was 51.4, the National Bureau of Statistics and China Federation of Logistics and Purchasing said today in Beijing. That’s the same reading as October and was higher than 24 out of 26 estimates in a Bloomberg News survey that had a median forecast of 51.1.
Stability in manufacturing growth in the world’s second-biggest economy may give Premier Li Keqiang more room to implement policy changes laid out after a Communist Party meeting last month. While industrial investment is picking up and retail sales have increased 13 percent so far this year, China faces headwinds that include industrial overcapacity, excessive corporate debt and slower export demand.
“This is good news for policy makers as the expected slowdown in growth appears pretty mild,” said Shen Jianguang, chief Asia economist at Mizuho Securities Asia Ltd in Hong Kong. “As policy makers can be assured of growth over 7.5 percent, the attention is now firmly on reform.”
China’s benchmark Shanghai Composite Index (SHCOMP) of stocks rose 3.7 percent in November, the biggest monthly gain since August, on optimism that the reform package outlined by Communist Party leaders on Nov. 15 will bolster the economy and corporate earnings. Gauges in the CSI 300 tracking industrial, technology and material producers rallied more than 4 percent while utilities declined.
Stable Unemployment
Even so, economists estimate growth in gross domestic product will slow to 7.5 percent next year from 7.6 percent this year, according to the median projection in Bloomberg News surveys last month. The government set a target for 7.5 percent expansion in 2013 and Li said in October that China needs annual growth of 7.2 percent to keep unemployment stable.
Estimates for the federation’s Purchasing Managers’ Index in Bloomberg’s survey ranged from 50.8 to 51.5. The reading contrasts with a decline in the preliminary figure of a separate gauge from HSBC Holdings Plc and Markit Economics released Nov. 21 to 50.4 from October’s 50.9. The median forecast for the final number due tomorrow is 50.5.
The PMI survey from the statistics bureau and logistics federation is based on responses from purchasing managers in 3,000 manufacturing companies. The HSBC survey is based on responses from managers at more than 420 businesses, and is weighted toward smaller private companies. Levels above 50 signal expansion in manufacturing while readings below point to a contraction.
Industrial Overcapacity
A gauge of output in today’s survey rose to 54.5 from 54.4 in October, while a new orders index declined to 52.3 from 52.5.
A measure of new export orders increased to 50.6 from 50.4 and an employment index rose for a second month to 49.6, the highest level since March.
A more forceful government crackdown on industrial overcapacity, rising prices of utilities under government reform plans, and central bank measures to rein in credit and shadow banking, may limit a stronger rebound in manufacturing in coming months.
China in July ordered more than 1,400 companies in 19 industries to cut excess production capacity and the Communist Party’s reform document said local officials will be evaluated on controlling overcapacity.
The Hebei provincial government said last month it demolished iron and steel furnaces and Xingtai Longhai Iron & Steel Group Co., a unit of China’s biggest producer, Hebei Iron & Steel Group Co., has halted production because of operational difficulties, according to Shenzhen stock exchange filings from customer Hangzhou Boiler Group Co.
To contact Bloomberg News staff for this story: Nerys Avery in Beijing at navery2@bloomberg.net
To contact the editor responsible for this story: Stanley James at sjames8@bloomberg.net
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