China's PMI heads for 7-month high

China's PMI heads for 7-month high
Stainless wires are moved into the warehouse at a specialty steel plant in Dalian, Liaoning province.

CHINA - British bank HSBC Holdings Plc said that China's manufacturing Purchasing Managers' Index will rise to a seven-month high of 50.9 in October, up from 50.2 in September, suggesting the overall economic growth momentum is likely to be extended after the recovery seen in the third quarter.

Stronger domestic demand supported a rise in the output sub-index to 51 - a six-month high - compared with a reading of 50.2 for the sub-index in September, HSBC's flash PMI data showed.

New orders and export orders also are stronger.

A reading above 50 means expansion in the manufacturing sector.

Based on the strong recovery in the third quarter, when the GDP growth rate rebounded to 7.8 per cent from 7.5 per cent in the second quarter, business confidence has been boosted, and that can lead to an increase of inventories in factories, economists said.

Qu Hongbin, chief China economist at HSBC, said the better-than-expected PMI preliminary reading indicates that China's growth recovery is consolidating in the fourth quarter.

"This momentum is likely to continue in the coming months, creating favourable conditions for speeding up structural reforms," Qu said.

Analysts anticipate that the Third Plenary Session of the Central Committee of the Communist Party of China, which will be held in November, will focus on more comprehensive reforms within the current favourable economic conditions.

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