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February PMI Shows Robust Growth For Chinese Manufacturers

International | Mar 01 2007

By Rudi Filapek-Vandyck

Having doubts about economic growth in China? Don’t! The latest survey data by CLSA suggest Chinese manufacturers are flying high and if anything the authorities may need to step on the monetary breaks again to keep things under control.

CLSA reports its China Purchasing Managers’ Index (PMI) – a composite indicator designed to provide a single-figure snap-shot of manufacturing operating conditions in the country– rose from 52.0 in January to 53.0. This is the index’s highest level in three months.

According to CSLA, the PMI was driven higher in February by faster growth of output and new orders. Stocks of purchases increased at an accelerated pace, reports CLSA, while suppliers’ delivery times lengthened at a sharper rate than one month previously. Growth of employment, on the other hand, eased slightly since January.

Eric Fishwick, Deputy Chief Economist at CLSA, points out that while input prices are still rising faster than output prices the abatement in some commodity prices is relieving pressure on Chinese manufacturers. He believes the differential in February was the smallest for 12 months. However, says Fishwick, the Chinese authorities have clearly signalled they are seeking a more moderate pace of expansion.

“The robust PMI therefore brings with it the likelihood of further monetary tightening.”

The rate of growth accelerated in February to the sharpest level since last July. Incoming new orders were the most marked for seven months. CLSA also reports that volumes of outstanding work rose for a fourth month in succession in February, “as operating capacity was tested by the stronger intake of new business”. The rate of growth of backlogs is believed to be the most marked since last July.

The survey also revealed the rate of cost inflation eased to the lowest level since last October while output prices rose at a solid pace.

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