MercoPress. South Atlantic News Agency

China’s manufacturing increases at fastest rate in 18 months

Even when domestic demand is playing a crucial role exports in China also seem to be picking up.

China’s Purchasing Managers Index, a gauge of the country’s manufacturing activities, rose at the fastest pace in 18 months in October when it expanded to 55.2, up from 54.3 in September, the China Federation of Logistic and Purchasing said this week.

The PMI, which includes forward-looking elements such as orders for future sales, has been hovering above 50 for eight straight months. It was also the sixth consecutive month that the reading had increased, indicating that China's economic recovery had steadily become more solid.

“The continued rise in China's PMI suggests the economy will continue to grow soundly,” said Zhang Liqun, a researcher at the State Council's Development Research Centre. “The domestic demand keeps growing significantly while the reading for new export orders signals that exports may start to recover too.”

The PMI sub-index for production climbed to 59.3 in October, up from 58 in September.

The reading for new orders hit 58.5 last month, up from 56.8 a month earlier while new export orders rose to 54.5 from 53.3, indicating a continued pick-up in external demand.

“The rising new export orders are a clear reflection of a recovery in exports and indicates growth in exports may turn positive in the fourth quarter or the first quarter next year,” the CFLP said in a statement posted on its Website.

The slump in exports continued to ease in the second half of the year, with September posting the smallest drop of 15.2 percent this year.

So far, China's economy has shown a V-shaped recovery boosted by massive government investments and a credit surge, as the GDP accelerated to 8.9% in the third quarter. The GDP grew 7.9% in the second quarter and climbed 6.1% in the first quarter.

“The economic growth is expected to accelerate to 9.5% in the fourth quarter judging from the improved exports and fast increasing domestic demand,” said Zhang.

At the end of 2008, the government announced a 4 trillion Yun (568 Billion US dollars) stimulus plan involving increased spending on infrastructure, such as rail and roads, to boost the domestic economy as exports slumped.

Figures released last week showed that the US economy grew by an annual rate of 3.5% between July and September, its first expansion in more than a year.

Germany, France and Japan all returned to growth between April and June

Meantime in Japan manufacturing production increased for a seventh consecutive month in September, extending the longest stretch of gains in 12 years, as spending by governments worldwide helped to revive trade, according to the Trade Ministry.

Output in September increased 1.4% over August.

Japanese firms said they planned to up output in October and November as well, indicating the recovery from a record export collapse in the first quarter is holding up.