At 56.1 in December, up from 55.7 a month previously, the headline HSBC China Manufacturing Purchasing Managers’ Index (PMI) pointed to a marked improvement of operating conditions in the Chinese manufacturing sector that was the second-fastest recorded by the series to date. For the fourth quarter as a whole, the PMI averaged its highest reading in the survey history.
Manufacturing production in China rose sharply in December, with the average rate of expansion for Q4 the fastest since Q2 2004. Where a rise in output was signaled, panelists widely attributed this to greater inflows of new work. There were also reports that growth was supported by new production lines coming on stream. Output levels have now risen for nine successive months.
Latest data pointed to the ninth consecutive monthly expansion of new order volumes received by Chinese manufacturers in December. The rate of increase in new work was considerable, accelerating to the fastest in four months. Those respondents that reported a rise in new business often linked this to buoyant demand from both domestic and external markets. Growth of new export orders was the fastest since March 2005, and in marked contrast to the severe reductions seen in Q4 2008. Foreign order levels have risen throughout the second half of 2009.
Staffing levels in the Chinese manufacturing sector continued to rise in December. Despite easing for the second month running, the rate of job creation was the third-fastest since the start of the series in April 2004. Anecdotal evidence suggested that firms were encouraged to take on additional workers in line with increased production requirements.
December data signaled that prices charged by Chinese manufacturers were raised at a considerable rate that was the fastest since July 2008. Companies reported that a combination of buoyant market demand and rising raw material prices had generated inflationary pressure. Average input costs faced by Chinese manufacturers rose sharply in December. Where an increase in purchase costs was signaled, panelists frequently linked this to rising raw material prices, with steel mentioned in particular. Aluminum, coal, petroleum, textiles and zinc were also cited as having risen in price on the month.
Commenting on the China Manufacturing PMI survey, Hongbin Qu, chief economist for China at HSBC, said: “The second-round effect of stimulus measures is filtering through to substantially benefit the manufacturing sector as we expected. The significant increase in the Output Prices Index in recent months is due to stronger demand and rising input costs, which have added to inflationary pressures. Yet, we believe inflation will be manageable in the coming months.”