At 57.4, up from 56.1 in the previous month, the headline HSBC China Manufacturing Purchasing Managers’ Index (PMI) rose to a record high at the start of 2010, signaling a marked improvement of operating conditions in the Chinese manufacturing sector. The index has now risen more than 16 points since posting a record low in November 2008.
Manufacturing production in China rose for the 10th successive month in January, increasing at a sharp rate that was the second-fastest in the survey history. Where an increase in output was signaled, firms often linked growth to greater inflows of new business from external and domestic sources. Data signaled that new orders rose at the fastest rate since the first month of data collection in April 2004. New business growth was supported by firmer market demand, while there were also reports that improved economic conditions had led to higher client spending. Export sales also rose in January, increasing at a near-record rate. This was in sharp contrast to the severe reductions seen at the beginning of 2009.
Staffing levels in the Chinese manufacturing sector continued to rise in January. Despite easing to the slowest in five months, the rate at which firms added to their workforce numbers was comfortably faster than the series average. Those respondents that reported a rise in employment generally attributed growth to continued gains in new business and a subsequent increase in production requirements.
Prices charged by Chinese manufacturers rose again in January, extending the current period of inflation to seven months. The rate at which firms raised their charges was the most marked since July 2008, mainly reflecting rising input prices. Higher client demand also allowed manufacturers to raise their factory gate prices on the month.
Data signaled that average cost burdens faced by Chinese manufacturing firms rose sharply in January, buoyed by increased prices for a number of raw materials. Prices paid for brass, copper, oil, steel and zinc were all reported to have risen from one month previously. Input price inflation, which was the strongest since July 2008, has now been signaled for seven months in succession.
Commenting on the China Manufacturing PMI survey, Hongbin Qu, chief economist for China at HSBC, said: “Industrial activity continues to accelerate, implying stronger GDP growth in the first quarter. But rising input and output prices also point to greater inflationary pressure, which will likely prompt more tightening measures in the coming months.”
