Factory boom averts hard landing fears

 
Tim Wallace
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THE FIRST growth since June was registered in yesterday’s HSBC purchasing managers’ index (PMI) for China, estimating industrial activity.

At 51.1, the index registered its strongest growth in five months. September’s reading came in at 49.9.

Any result above 50 indicates expansion in the sector.

The positive reading is expected to alleviate fears of a “hard landing” as Chinese economic growth falls, according to HSBC’s China chief economist Hongbin Qu.

The manufacturing data should provide a “steady start” for the industry in the fourth quarter, he said. The strong data pushed up markets.

Hongbin Qu continued, “inflation components within the PMI results confirmed stable output-price growth and slower input-price inflation.”

However, analysts pointed to the slowing Eurozone economy as a risk to Chinese growth. As a major export market, a slowdown would cut demand for Chinese goods.

Meanwhile Japanese exports rose and imports shrank, which analysts expect to put the country’s trade balance into surplus in the third quarter.

Exports expanded by 3.3 per cent compared with August. Over the third quarter export volumes increased by 3.4 per cent on the previous three months. That compares with a 10 per cent drop in quarter two compared with quarter one.

Import volumes declined by almost one per cent, quarter on quarter.

“If this pattern is repeated for goods and services exports and imports, there will be a significant net trade contribution to third quarter GDP,” said Lombard Street Research’s Michael Taylor.

However, forecasts also suggest declining international demand may leave reconstruction as the main driver of demand into 2012.

“Concerns remain about the sustainability of Japan’s industrial and export recovery once capacity is restored,” continued Taylor.

“A slowing global economy will dampen export growth into 2012.”