Source: Markit Economics

Latest data signalled that growth of the Chinese manufacturing sector was maintained in September. The headline HSBC China Manufacturing PMI (Purchasing Managers' Index)  remained broadly unchanged from a month earlier, registering 55.0 after adjusting for seasonal factors, and has now remained above the neutral level of 50.0 for six consecutive months.

Underlying the overall improvement was a substantial rise in manufacturing production. Output levels have now risen for six successive months, although the latest expansion was marginally slower than August’s twenty-two month peak. Those panellists that reported output growth generally linked this to further gains in new business and an improved business climate.

Levels of new business placed at Chinese manufacturers rose for the sixth successive month in September, mainly reflecting improved client demand from both domestic and external sources. Despite easing from the previous month, growth of new business remained substantial, and far faster than the series average. Foreign order levels rose for the fourth month running in September, increasing at the second-fastest rate for twenty-seven months. The expansion of total new orders outpaced that of export sales, suggesting that the overall improvement in firms’ order book positions was again led by the domestic market.

Employment in the Chinese manufacturing sector rose again in September, extending the current period of job creation to four months. Data signalled that the rate at which workforce numbers were bolstered accelerated to the most marked for twenty-five months, primarily in response to rising sales volumes.

Prices charged rose for the third month running in September, albeit at the weakest rate in that sequence. Those respondents that reported an increase in output prices frequently linked this to rising raw material prices. Despite easing to the slowest in the current three-month period of inflation, average cost burdens increased at a substantial rate in September. Rising prices for corn, iron ore, petroleum and steel were all reported to have fed higher overall input costs.

Commenting on the China Manufacturing PMI survey, Hongbin Qu, Chief Economist, China at HSBC Bank said: “Although the headline PMI remained broadly unchanged from the previous month, there was a marked expansion of manufacturing employment in September. New business growth remained substantial, signalling that the recovery in demand from both domestic and external sources is well on track. Rising employment in the manufacturing sector is even more encouraging because it suggests that China’s infrastructure-led recovery is starting to spread over to the consumer sector.”

The HSBC China Report on Manufacturing is based on data compiled from monthly replies to questionnaires sent to purchasing executives in over 400 manufacturing companies.