Chinese manufacturing growth reached a three-month high in October, despite domestic and foreign demand slowing down, according to HSBC.
Commenting on the Flash China Manufacturing PMI survey, Hongbin Qu, Chief Economist, China & Head of Asian Economic Research at HSBC said:
“The HSBC China Manufacturing PMI improved to 50.4 in the flash reading for October, up from 50.2 in the final reading for September. Domestic as well as external demand showed some signs of slowing although both remained in expansion territory. Disinflationary pressures intensified, as both the input and output price indices declined further.”
Hongbin Qu added:
“Meanwhile both employment and inventory indices improved. While the manufacturing sector likely stabilized in October, the economy continues to show signs of insufficient effective demand. This warrants further policy easing and we expect more easing measures on both the monetary as well as fiscal fronts in the months ahead.”
Qu Hongbin, HSBC economist in Hong Kong, essentially said that although the index has crept up again, there are still downside pressures that are affecting internal and external demand, increasing the risk of deflation.
The index monitors Chinese factory activity and is a key indicator of the health of the economy. The reading was slightly ahead of expectations.
Despite the reading being positive, sub index figures revealed that factory output had fallen to a five-month low.
In the third quarter China’s economy expanded by 7.3 percent, which is lower than the 7.5 percent expansion in the previous three months – the slowest pace of growth since the economic crisis.
The country’s growth target for 2014 is 7.5 percent (the same as last year), however, Chinese officials have said that a lower increase should be tolerable if the job market continues to be strong.