Chinese Manufacturing Activity Continues To Surge Ahead In November

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China's manufacturing activity recorded its most marked improvement since April 2004, a survey by Markit Economics and HSBC revealed on Tuesday.

The HSBC Purchasing Managers' Index stood at a seasonally adjusted 55.7 in November, up from 55.4 in October. A reading above 50 indicates expansion, while one below 50 suggests contraction.

Manufacturing output climbed for the eighth straight month and also at a slightly accelerated pace. The growth in output was widely attributed to further gains in new business.

Growth in new businesses reflected improved demand from both domestic and external sources. New product launches and favorable market conditions were also cited by some panelists as contributing factors for higher sales. Export sales at Chinese manufacturers continued to rise in November and also at its fastest rate since March 2005.

Staffing levles in the manufacturing sector rose for the sixth straight month and also at its second-fastest rate on record. Some respondents cited business expansion policies as a driving factor for increased staffing.

"The sustained improvement in the HSBC China Manufacturing PMI implies that China's recovery has been consolidated," said Hongbin Qu, Chief Economist for China at HSBC. "Rising new orders and production, plus the rapid expansion of new export orders, have and will generate new jobs."

Further, average input costs faced by Chinese manufacturers rose sharply in November. Brass, chemicals, coal, petroleum and steel were all reported to have risen in price on month. On the other hand, strong competitive pressures held back manufacturers from raising output prices considerably, with prices charged rising at a much slower rate than overall cost burdens. Nonetheless, output price inflation was marked, and far faster than the series average.

"Despite the increasing inflationary pressure on input prices, inflation in finished goods will be relatively mild given the still excessive capacity in many sectors," Hongbin opined.

The HSBC PMI report on manufacturing is compiled based on a survey of purchasing executives in over 400 manufacturing companies across the country and serves as an indicator of the overall health of the manufacturing sector.

Meanwhile, a report from China's Federation of Logistics and Purchasing showed earlier on Tuesday that its purchasing managers' index remained stable at an 18-month high. The index stood at 55.2 in November compared to expectations for a reading of 55.7. This was the ninth successive month in which the index was above the no-change level of 50.

China's manufacturing activity recorded its most marked improvement since April 2004, a survey by Markit Economics and HSBC revealed on Tuesday. (Market News Provided by RTTNews)