China Manufacturing Sector Expands Most Since 2011

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China’s manufacturing sector expanded at the strongest pace since January 2011 on robust output and new work, survey results from IHS Markit showed Monday.

The Caixin manufacturing Purchasing Managers’ Index rose to 53.6 in October, the highest reading since January 2011, from 53.0 in September. A score above 50 indicates expansion in the sector.

The official survey, released over the weekend showed that the manufacturing PMI fell marginally to 51.4 from 51.5 in September. At the same time, the non-manufacturing PMI climbed to 56.2 from 55.9 a month ago.

New orders expanded at the strongest pace since November 2010. However, growth in new export sales softened notably amid a resurgence of the coronavirus disease 2019 virus across a number of export markets.

The substantial increase in overall workloads led manufacturers to ramp up their output again in October, with the rate of growth among the sharpest seen over the past decade.

Companies maintained a cautious approach to staff numbers in October amid reports of efforts to contain costs. As a result, firms raised their staffing levels only slightly.

Latest data showed a weaker increase in average input costs in October. Companies partially passed on higher cost burdens to clients by raising their average selling prices. Nonetheless, the rate of charge inflation was mild.

Reflective of the strong improvement in overall market conditions, business confidence regarding the 12-month outlook for output improved to its highest since August 2014.

“As the economic indicators for consumption, investment and industrial output for September were generally better than expected, it is highly likely that the economic recovery will continue for the next several months,” Wang Zhe, senior economist at Caixin Insight Group said.

But there are still many uncertainties outside of China, so policymakers need to be cautious about normalizing postcoronavirus monetary and fiscal policies, the economist said.

In the near term, supportive fiscal policy and resilient foreign demand for Chinese goods will keep activity in industry and construction strong, Julian Evans-Pritchard and Sheana Yue, economists at Capital Economics, said. Meanwhile, easing virus restrictions and improving labour market conditions should shore up consumer sentiment and household spending, the economist added.

The material has been provided by InstaForex Company – www.instaforex.com

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