China manufacturing data signals rebound gathering pace

Manufacturing in China is showing growth once more (Getty Images)

A Chinese manufacturing index signaled the first expansion in 13 months, adding to signs that economic growth is rebounding after a seven-quarter slowdown.

The preliminary reading was 50.4 for a purchasing managers' index released today by HSBC Holdings and Markit Economics. It compares with a final level of 49.5 for October. A reading above 50 indicates expansion.

Gains in manufacturing bolster prospects for a sustained pickup in economic growth that slowed last quarter to the weakest pace in more than three years. A rebound may smooth a once-a-decade leadership transition for the ruling Communist Party, set to install Li Keqiang as premier in March, and reduce the likelihood of additional monetary stimulus.

"The economic recovery continues to gain momentum," Qu Hongbin, chief China economist at HSBC in Hong Kong, said in a statement. "However, it is still the early stage of recovery and global economic growth remains fragile."

The MSCI Asia Pacific Index climbed 0.8 percent as of 6:37 p.m. in Tokyo, headed for its highest close in two weeks. The Shanghai Composite Index closed 0.7 percent lower after the biggest gain in three weeks yesterday, as waning speculation of lower bank reserve requirements overshadowed an increase in the PMI.

China Gas Holdings, which supplies more than 7 million residential users and 40,000 industrial and commercial customers, said yesterday that it expects to report a "significant increase" in profit in the six months through September. Its shares gained the most in two weeks.

A separate, government-backed index of purchasing managers' views at manufacturers, which showed an expansion in October for the first time in three months, is due to be released Dec. 1. The final HSBC-Markit index for November is due Dec. 3.

Zhang Zhiwei, chief China economist at Nomura Holdings, said that growth will pick up "strongly" this quarter to an 8.4 percent annual pace from 7.4 percent in the previous three months.

Some economic indicators in October pointed to a growth recovery, with exports rising at the fastest pace in five months and industrial output and retail sales exceeding forecasts. At the same time, new lending unexpectedly fell from a year earlier and money supply increased less than forecast.

Economists have scrapped projections for any easing of monetary policy in the rest of 2012. Analysts surveyed by Bloomberg News Nov. 14-19 see China holding the reserve- requirement ratio for the biggest banks at 20 percent through the end of the year, based on the median estimate. That compares with the median forecast for a 0.5 percentage-point cut in last month's survey.

China's gross domestic product is poised to expand 7.7 percent this year, the weakest pace since 1999, based on the median estimate of analysts surveyed by Bloomberg News this month. Growth may pick up to 8.1 percent in 2013, according to the median of 46 forecasts.