April 29, 2011 / 5:51 AM / in 8 years

UPDATE 2-China HSBC PMI hovers near 7-mth low; inflation slows

 * PMI suggests factory sector growing steadily, not booming
 * Inflation easing but still high, supports case for rate
 * Factories say inflation pressure coming from raw materials
 * Government PMI due on Sunday; seen rising to 54 from 53.4

 (Recasts, adds World Bank)	
 BEIJING, April 29 (Reuters) - China's manufacturing growth
held steady in April and factory inflation, while high, dropped
to an eight-month low, a purchasing managers' index showed on
 The HSBC PMI, designed to preview conditions in a broad
range of industries before official data is released, stood at
51.8 in April, steady from March and just above a seven-month
low of 51.7 in February.	
 The 50-point level demarcates expansion from contraction. A
reading above 50 indicates growth.	
 The report suggested the manufacturing sector in the world's	
second-biggest economy is growing steadily, rather than booming,	
a trend expected to be reinforced in official PMI data to be
released at 0100 GMT on Sunday.	
 Analysts predict the official PMI will show a rise to 54 in
April from 53.4 the previous month.	
 "The results confirmed the picture of steady growth across
the manufacturing sector," said Qu Hongbin, an economist at
HSBC. "This calls for a continuation of Beijing's tightening
efforts in the coming months."	
 HSBC China PMI (seasonally adjusted):	
 Apr   Mar   Feb   Jan   Dec   Nov   Oct   Sep   Aug   Jul	
 51.8  51.8  51.7  54.5  54.4  55.3  54.8  52.9  51.9  49.4	
 The government data shows the factory sector has grown every
month for two years, so a wind down in recent months was not a
 Some even welcome it as a way to cool prices because the
slowdown has come at a time of quickening inflation.	
 The HSBC survey showed prices rising less briskly, but
climbing nonetheless: the sub-index for input prices fell to an
eight-month low of 62.4, well above the 50-point mark.	
 That supports investor bets for China to further raise
interest rates in coming months. As it is, annual inflation ran
at a 32-month high of 5.4 percent in March, and is widely
expected to accelerate to as high as 6 percent by June.	
 The World Bank said on Thursday it was too early for China
to halt its policy tightening as it raised its year-average
inflation forecast in a quarterly review of the economy.
 Stubborn price pressures have fed market talk that Beijing
could let the yuan rise at a faster clip, or even take more
drastic action such as revaluing the currency or widening its
daily trading band.	
 Beijing has not confirmed any of the chatter, although it
has demonstrated its appetite for a stronger yuan by guiding it
to a record against a sluggish dollar. [ID:nL3E7FT096]	
 Markit, a British research firm that compiles the PMI, also
highlighted the following findings:	
 -- Factory output slid to a nine-month low, reflecting weak
growth in new businesses.	
 -- A sub-index for new orders edged up slightly and while it
held above 50, the tepid growth was a result of soft demand.	
 -- Most manufacturers attributed rising input costs to
rising prices for raw materials including crude oil and steel.	
 -- The average time taken by parts suppliers to deliver
components to factories lengthened for the 21st consecutive
month. Firms surveyed said longer delivery times were a result
of a shortage of parts, with Japan's earthquake, tsunami and
nuclear disasters causing some of the disruption.	
 (Reporting by Koh Gui Qing; Editing by Ken Wills and Jacqueline
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