China PMI strength eases global slowdown worries

China’s manufacturing expanded at the fastest pace in four months in September, adding to signs that economic growth is stabilising even as the government curbs energy use and tries to cool the property market.

The purchasing managers’ index rose to 53.8 from 51.7 in August, China’s logistics federation and statistics bureau said in an e-mail. The median forecast of 15 economists surveyed by Bloomberg News was 52.5, with none forecasting such a large gain. Readings above 50 indicate expansions.

The data reinforce evidence from a separate purchasing manager survey two days ago that China’s industries are gearing up again after the economy slowed in the second quarter. Bank of America-Merrill Lynch said that officials may accelerate gains by the yuan as domestic demand strengthens and the US maintains pressure for a stronger currency.

“Today’s better than expected PMI number suggests that China’s economy has regained strength on a strong pick up in domestic orders and a steady increase in external demand,” said Liu Li-Gang, a Hong Kong-based economist at Australia & New Zealand Banking Group Ltd.

Copper climbed to a 26-month high on the manufacturing data and a weaker dollar. Asian stocks rose. Chinese markets are closed for a holiday.

The manufacturing index released this week by HSBC Holdings and Markit Economics rose to the highest in five months. The nation’s growth may be aided in coming months by government plans to speed the completion of stimulus projects and boost public housing construction.

In today’s data, an output index rose to 56.4 from 53.1 in August. A measure of new orders gained to 56.3 from 53.1 and an export-order index climbed to 52.8 from 52.2.

Economic growth “has stabilised after falling from a high level” and the nation’s slowdown will be limited by continued gains in consumption, investment and exports, Zhang Liqun, a researcher at the Development Research Center of the State Council, said in today’s statement.

“Supposedly seasonally adjusted,” the PMI typically climbs in September when exporters are filling Christmas orders, Capital Economics Ltd. said this week. Credit Suisse AG and Bank of America-Merrill Lynch also said today that seasonal factors may have played a role.

An input price index rose to 65.3 from 60.5, the biggest jump among sub-indexes, as raw-material costs climbed. China needs to raise interest rates and allow a stronger yuan to contain inflation and asset-bubble risks, according to ANZ’s Liu. The Chinese currency has gained 2 per cent since a peg to the dollar was scrapped on June 19.