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Chinese output rises at fastest pace since March 2011

Staff Writer |
Chinese manufacturers signalled an improvement in growth at the start of the fourth quarter, with output expanding at the quickest rate in over five-and-a-half years amid a rebound in new order growth.

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Stronger demand appeared to be led by improved domestic orders, however, as the level of new export sales fell slightly over the month. Meanwhile, companies cut their staff numbers at the slowest pace in 17 months, while backlogs of work continued to accumulate.

Inflationary pressures picked up sharply in October, with input cost inflation accelerating to its fastest since September 2011 and output charges rising to the greatest extent since February 2011.

The seasonally adjusted Purchasing Managers’ Index (PMI) posted 51.2 at the start of the fourth quarter, up from 50.1 in September.

This signalled a moderate improvement in the health of the sector that was the greatest since July 2014. Stronger growth in production supported the higher headline index reading in October. Furthermore, the latest increase in output was the fastest since early 2011.

According to panellists, improved inflows of new work underpinned the expansion in production. This was highlighted by a further rise in total new orders in October, with the rate of growth quickening to a 27-month record. However, improved intakes in new work appeared to be driven by stronger domestic demand, as new export business declined slightly in October.

Despite increased production, stocks of finished goods increased only marginally during the latest survey period. According to respondents, the increased use of current inventories to meet new orders had dampened the overall rate of stock accumulation.

The trend in falling employment softened at the start of the fourth quarter. This was highlighted by the weakest decline in staff numbers since May 2015 during October. Companies that cut their workforce numbers generally commented on company down-sizing as part of efforts to reduce costs.

This contributed to further pressure on operating capacity, as shown by the eighth successive monthly rise in backlogs of work. Faster growth in new orders and output led firms to raise their purchasing activity over the month.

The rate of expansion remained modest, however, despite quickening to a three-month high. At the same time, inventories of purchased goods declined, albeit marginally.

Anecdotal evidence attributed the fall to the increased use of inputs to meet higher production schedules. Chinese manufacturers signalled a sharp and accelerated increase in average cost burdens in October.

Furthermore, it was the quickest rate of input price inflation for just over five years. Companies generally passed on greater production costs to clients by raising their output charges at a similarly sharp rate.

Notably, it was the fastest rate of charge inflation since February 2011.


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