BEIJING (Reuters) - Growth in China’s giant manufacturing sector hit a two-year high in January as domestic demand strengthened, a private survey showed, underlining hopes the nation’s economic recovery is slowly gaining momentum.
The final HSBC purchasing managers’ index (PMI) rose to 52.3 in January, the highest since January 2011 and a shade above last week’s flash, or preliminary, reading of 51.9.
A revival in factory production would cement hopes that China’s economic growth is picking up after suffering its weakest pace last year in 13 years. Economists expect any recovery to be modest, in part because the euro zone is in recession.
Backing expectations a rebound will be led by domestic demand rather than exports, the PMI data showed new orders running at a two-year high and markedly stronger than new export orders.
“We see increasing signals of a sustained growth recovery in coming months,” said Qu Hongbin, a HSBC economist.
“The steady investment growth led by infrastructure projects, improving labor market conditions boosting consumer spending, and the ongoing re-stocking process to lift production growth.”
In line with busier production, the input prices sub-index jumped to its highest since September 2011 to be well above the 50-point level demarcating growth and contraction compared with the previous month. Manufacturers said higher raw material costs had driven up inflation.
The new orders sub-index -- which has the biggest weighting in the PMI at 30 percent -- climbed to 53.7 in January, a level last seen in January 2011.
The new export orders sub-index rose to hover just above 50.
Markit Group, which compiles the PMI, said the marginal improvement in new export orders reflected the fact that just 11 percent of those surveyed reported healthier demand. But U.S. and European markets, the two biggest buyers of Chinese goods respectively, showed firmer demand.
Lunar New Year holidays often make reading economic data difficult because the break falls at different times of the year. The holiday falls in February this year but was in January last year.
A comparison of average January and February PMI readings for 2012 and 2013 suggests this year’s pick-up could be more enduring than a seasonal blip.
Over the two months, the PMI averaged 49.2 last year. That means the February 2013 PMI need only be higher than 46.1 for this year’s average to handily surpass last year‘s.
Analysts polled by Reuters in January forecast China’s economy would grow 8.1 percent this year and next, above 7.8 percent in 2012, the lowest pace since 1999.
Reporting by Koh Gui Qing; Editing by Neil Fullick