China Manufacturing Activity Continues To Surge Ahead

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China's manufacturing activity recorded a marked improvement that was the fastest in nearly six years in January, the results of a survey showed.

Markit Economics announced on Monday that the HSBC manufacturing Purchasing Managers' Index (PMI) stood at a seasonally adjusted 57.4 in January, up from 56.1 in December. A reading above 50 indicates expansion, while one below suggests contraction. January's headline PMI is the highest recorded since the survey's inception in April 2004.

Manufacturing output climbed for the tenth straight month and also at a sharp pace that was the second fastest in survey history. The growth in output was widely attributed to greater inflows of new work from both external and domestic sources.

New incoming business increased at the fastest rate since the first month of data collection in April 2004, fueled by buoyant demand and improved economic conditions. Export sales also rose in January, increasing at a near-record rate.

Substantial gains in new business continued to drive up employment levels in the manufacturing sector, although the rate of increase was the slowest in five months. Panelists cited increased production requirements for the rise in job creation.

Meanwhile, average input costs faced by Chinese manufacturers rose sharply in January and for the seventh successive running, led by increased prices for a number of raw materials. Prices of brass, copper, oil, zinc and steel were all reported to have risen.

On the other hand, output charges were raised at a considerable rate that was the fastest since July 2008, reflecting rising input prices. Respondents also cited higher client demand for raising charges.

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.

The findings are in contrast with the semi-official data from China's Federation of Logistics and Purchasing (CFLP), which announced earlier today that the purchasing managers' index slipped to 55.8 in January from 56.6 in the previous month.

The output sub-index fell to 60.5 in January from 61.4 in December, while the new orders sub-index edged down to 59.9 from 61.0. The sub-index measuring employment levels in the manufacturing sector slipped to 50.6 from 52.2, CFLP said.

China's economy recorded double-digit growth in the fourth quarter of 2009 and is poised to overtake Japan to become Asia's biggest economy. GDP data for the three months through December showed an expansion of 10.7%, while full year growth reached 8.7%.

China's recovery was driven by a massive government stimulus package but there are now concerns that the economy is expanding too quickly. The central bank is now expected to raise interest rates ahead of official guidance, while banks have already been ordered to keep more money in reserve.

China's manufacturing activity recorded a marked improvement that was the fastest in nearly six years in January, the results of a survey showed. (Market News Provided by RTTNews)