China HSBC flash PMI hits 2-year high in January

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Growth in China's giant factory sector accelerated to a two-year high in January. (Reuters) Growth in China's giant factory sector accelerated to a two-year high in January. (Reuters)
SummaryLatest indication that the world's second-largest economy is steadily recovering.

to keep growing faster than China's overall automotive industry which is expected to expand by 8 percent this year.

EXPORT ORDERS RECOVER

The new export orders sub-index rose to 50.1 in January, up from December's 49.2 that pointed to waning demand.

The sub-index was persistently weak in the past year, rising above the 50-point threshold for only three months in 2012 and at times contradicting China's official trade data.

HSBC's final PMI had showed China's new export orders cooling in December, at odds with government data that said exports zoomed to seven-month highs that month.

The jump in exports, alongside generous government investment in infrastructure, helped to pull China's economy out of its worst downturn in three years between October and December to grow 7.9 percent from a year earlier.

But the late spike in activity was not enough to prevent China from sinking into its slowest annual pace of economic expansion in 13 years in 2012, growing 7.8 percent.

Many analysts are cautiously optimistic about China's economic prospects this year and are betting on steady state investment to stabilise growth. Exports, however, are expected to remain a drag.

A Reuters poll this week showed analysts predict China's annual economic growth would rebound a shade to 8.1 percent this year.

But faster growth is also expected to fuel inflation.

While a majority of the 24 analysts polled by Reuters believed China would not change its monetary policy this year, a third of them thought the central bank could raise interest rates in the second half of 2013.

Thursday's flash PMI showed price pressures may be building. The input price sub-index was at its highest since September 2011, while the output price sub-index pulled back slightly.

HSBC said its PMI survey is based on a poll of purchasing executives from over 420 manufacturing firms, and that the flash PMI is compiled from responses from 85 percent to 90 percent of that pool.

But in a sign that China's recovery could be uneven, German engineering conglomerate Siemens AG warned on Wednesday that demand from China was likely to remain weak for the coming months after it saw global orders for industrial automation and drive technology

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