Factory surveys show China reviving, global rebound fragile

BEIJING Mon Dec 3, 2012 5:50am EST

A worker cleans the window of an apartment building at a residential area in central Beijing, October 24, 2012. REUTERS/Petar Kujundzic

A worker cleans the window of an apartment building at a residential area in central Beijing, October 24, 2012.

Credit: Reuters/Petar Kujundzic

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BEIJING (Reuters) - China's economy picked up in November but a broader global recovery remains fragile and patchy, a clutch of factory surveys suggested on Monday, with activity elsewhere in Asia remaining subdued amid depressed demand from the developed world.

The euro zone, where factory surveys are due later, is on course for its worst quarter since the depths of the global financial crisis in early 2009. The U.S. picture is brighter, but manufacturing growth is still seen slowing in the fourth quarter.

The big emerging economies that have contributed most to global growth in recent years have been sputtering of late, with India expected to post its weakest full-year GDP expansion in a decade and Brazil logging an unexpectedly weak third quarter.

That has left investors once again hoping China will take up the slack, and evidence has been accumulating since late September that the Chinese economy is regaining its vigor after seven straight quarters of slowing growth.

"There is growing confidence that China's economy bottomed in July-September, with signs of firmer external demand," said Hirokazu Yuihama, a senior strategist at Daiwa Securities.

Monday's final reading of HSBC's China manufacturing Purchasing Managers' Survey (PMI) rose to 50.5 in November from 49.5 in October, the first time since October 2011 the headline number has topped the 50-point line that demarcates growth and contraction from the previous month.

"This confirms that the Chinese economy continues to recover gradually," HSBC's chief China economist Hongbin Qu wrote.

It followed a similar survey from the National Bureau of Statistics, released on Saturday, that showed the pace of growth in the manufacturing sector quickening. The official PMI rose to a seven-month high of 50.6 for November, from 50.2 in October.

But contained within the official data were potentially worrying signs that the Chinese economy has failed to shed its heavy reliance on state-led investment.

Growth accelerated for large firms for the third month in a row, but medium and smaller companies saw a retrenchment, with the decline more pronounced for the smaller firms, the National Bureau of Statistics said in an accompanying note.

"The improving numbers are mostly because of government investment," said Dong Xian'an, economist with Peking First Advisory, referring to the official PMI.

"From the second quarter the government has unleashed a lot of projects, and that has started to be felt in the economy, but it's not a very healthy recovery yet."

PATCHY REBOUND

That might go some way towards explaining why the rebound in East Asia's other exporting powerhouses appears more tentative.

South Korea's HSBC/Markit PMI edged up to a seasonally adjusted 48.16 in November from 47.37 in October and a 43-month low of 45.71 in September, but was still below the key 50-mark for the sixth month in succession.

Taiwan's PMI reading has also been below 50 for six successive months, with the headline number deteriorating to 47.4 in November from 47.8 in October on weakening demand at home and abroad.

Monetary easing by the big developed world central banks has been blamed for pushing up the currencies of countries such as Korea and Taiwan, hampering their export-led recoveries.

Weekend data from South Korea showed exports rose in annual terms for the second consecutive month in November, but the rate of growth still remained far below what was seen in 2011 and a breakdown of the numbers highlighted the patchy global recovery.

Shipments to China and Southeast Asia posted sharp gains over a year earlier, whereas demand from the United States and the European Union shrank.

Debt-mired Europe relapsed into recession in the third quarter, and is expected to remain a drag on the world economy well into 2013.

Manufacturing PMI surveys from Europe are expected to show the rate of decline in the sector easing, but the headline reading for the euro zone is still seen well below the 50-mark at 46.2.

In the United States, the Institute of Supply Management (ISM) index of national factory activity, one of two PMI surveys due on Monday, is expected to decline slightly to 51.3 for November, still above the 50-line, from 51.7 in October.

India, whose economic woes are as much to do with internal politics and its struggle to control a yawning fiscal deficit as with the global downturn, represented a bright spot among Monday's factory read-outs.

India's factory activity has been expanding for over three-and-a-half years, although it remains well below the expansion rate seen in the years before the global financial crisis.

Monday's HSBC manufacturing PMI, which gauges the business activity of India's factories but not its utilities, beat expectations, rising to 53.7 in November from 52.9 in October.

The pace of expansion in Indonesia's factory sector eased in November, but new orders and new export orders reached their highest levels since the HSBC survey series began in April 2011.

(Additional reporting by Sumanta Dey in Bangalore, Chikako Mogi in Tokyo, Se Young Lee in Seoul and Faith Hung in Taipei; Writing by Alex Richardson; Editing by Neil Fullick)

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Comments (3)
Mott wrote:
Seasonal?

Dec 03, 2012 1:38am EST  --  Report as abuse
wigglwagon wrote:
One thing, and only one thing creates jobs. That is demand for goods and services. America was home to the biggest consumer market the world has ever seen. That was when nearly 40% of the American workers were union and were well paid.

After 30 years of Democrats and Republicans working together to hold down wages and destroy benefits for American workers, only 6% of workers are union and well paid. Lots of people are actually surprised that America is no longer prosperous.

Dec 04, 2012 3:30am EST  --  Report as abuse
mountainrose wrote:
Yeap. American companies can hire 3 engineers in India for what they pay one stateside. 70% of this economy is consumer based they say . You can look at any appliance or piece of furniture in your house including the clothes we wear you will see it’s made abroad in places like China where Apples(and others) chief vendor Foxconn employs 1.3 people they pay $300 a month to make stuff like I phones. Tough for any American co. to compete with that.Just look on the back of your laptop or desktop, usually says made in Thailand or Malaysia The giant super sized global consumer credit bubble that helped mask all that is gone and it’s not coming back this lifetime. And now those export driven Asian economies are feeling it too.Dems and republicans serve the same masters.

The Shanghai exchange, unlike the Hong Kong one, is closed to foreigners, it is down 16% yr. to date. Personally I would pay closer attention to what the locals think of their own economy if you want to get an accurate read on Chinese economy .

Dec 04, 2012 7:35am EST  --  Report as abuse
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