China October official manufacturing PMI beats forecasts

BEIJING (Reuters) - China's manufacturing sector grew at the fastest pace in 18 months in October, official data showed on Friday, adding to signs of a stabilisation in the world's No.2 economy as the government readies a series of key economic reforms.

The survey's strength offered some relief on the growth outlook after a disappointing run of data last month, including a below-forecast official PMI and a surprise drop in exports.

The official Purchasing Managers' Index (PMI) stood at 51.4 last month, up from September's 51.1 and above a forecast of 51.2 in a Reuters poll of economists.

"This is in line with our relatively benign growth outlook," said Louis Kuijs, an economist at RBS, in a note.

"With global demand momentum likely to pick up gradually and domestic demand growth remaining solid, we expect GDP growth to comfortably exceed the government's bottom line in the coming quarters."

A breakdown of the sub-indexes showed that new orders in large industries reached 53.8, while for small industries the number was just 48.8, suggesting that the trend towards stabilisation has still largely only been felt by larger firms.

"The PMI data for October shows a continued increase, indicating a preliminary stabilisation in the economy," Zhang Liqun, an economist at the cabinet think-tank Development Research Center, said in a statement released with the PMI.

"The foundation for a recovery is not yet solid."

Signs of improvement will help the government push its reform agenda at the upcoming Communist Party's third plenary meeting from November 9 to November 12.

In the first nine months of the year, the economy grew 7.7 percent from a year earlier, putting it on track to achieve Beijing's 2013 target of 7.5 percent, although that would still be the weakest growth rate in 23 years.

Economists in a recent Reuters poll saw the economy growing an annual 7.5 percent in the fourth quarter from 7.8 percent in the third.

(Reporting By Natalie Thomas; Editing by John Mair)