China’s economy is strengthening after a two-quarter slowdown, with a manufacturing gauge rising to a 16-month high in August as new orders jumped and overseas demand rebounded.
Bloomberg reported that the Purchasing Managers’ Index was at 51.0, the National Bureau of Statistics and China Federation of Logistics and Purchasing said yesterday in Beijing. HSBC Holdings Plc and Markit Economics will today release the final reading of their gauge after a preliminary figure on August 22 showed the biggest gain in three years.
Improvement in manufacturing may bolster confidence that the economy is responding to Premier Li Keqiang’s policies to support growth amid a crackdown on shadow banking aimed at curbing financial risks. JPMorgan Chase & Co. Last week joined Deutsche Bank AG and Credit Suisse Group AG in raising estimates for an increase in gross domestic product, citing strength in infrastructure and real-estate, and a pickup in exports.
“The recovery is being driven primarily by domestic demand but international demand is picking up too as we can see from the jump in new export orders,” said Lu Ting, head of Greater China economics at Bank of America Corp. in Hong Kong. “This will surely boost markets’ confidence in China’s recovery amid the turmoil in some emerging markets.”
The Shanghai Composite Index rose two per cent last week, the biggest gain since March. The yuan completed its second straight monthly advance in August on optimism the economy is picking up.
The official PMI figure compared with the 50.6 median estimate of 31 analysts in a Bloomberg News survey and July’s 50.3 level. Estimates ranged from 50.4 to 52. The preliminary reading of HSBC’s index was 50.1, the first reading above 50, which denotes expansion, since April.
JPMorgan raised its estimate for China’s third-quarter economic growth to 7.6 per cent from 7.4 per cent and its projection for the final three months of the year to 7.5 per cent from seven per cent, Hong Kong-based chief China economist Zhu Haibin said in a report.
“Economic conditions are improving and the downside risk to economic growth has been mitigated in the near term,” Zhu said.
Deutsche Bank lifted its third-quarter estimate to 7.7 per cent from 7.5 per cent, according to an August 22 note. Credit Suisse last week increased its 2013 forecast to 7.6 per cent from 7.4 per cent.
China’s GDP growth slowed to 7.5 per cent in the second quarter from a year earlier, extending the longest streak of sub-8 per cent expansion in at least two decades and putting the government at risk of missing its 2013 goal of 7.5 per cent. Li signaled in July he won’t tolerate a slowdown beyond a seven per cent as the bottom line.
A sub-index of new orders in a report rose to 52.4, the highest level since April 2012 and a gauge of input prices was the highest since February.