Manufacturing Expands in China and India as the Global Economy Inches Toward a Recovery

By Jason Simpkins
Managing Editor
Money Morning

Manufacturing in China and India expanded last month, according to multiple factory indices that showed the two powerhouses of production are benefiting from government stimulus measures and a tentative rise in economic activity around the world.

In India, the ABN AMRO Bank purchasing managers' index (PMI) rose to 53.3 in April from 49.5 in March. A reading above 50 indicates growth. The index, which is compiled by the U.K.-based Markit Group, bottomed at 44.4 in December and has been on the rise ever since. The latest reading is the highest in seven months, Reuters reported.

"The return to growth was primarily driven by an improvement in domestic demand," Gaurav Kapur, an economist with ABN Amro Bank, said in the report. "Business conditions in the manufacturing sector have improved significantly after a period of sharp contraction and gradual stabilization."

Domestic rebound has begun since the Indian government announced three stimulus packages consisting mainly of tax cuts and public works spending. The Reserve Bank of India last month cut interest rates to their lowest level since 2000 and said it expects the economy to grow 6% in the current fiscal year.

China, which unveiled a $586 billion stimulus package last November that has increased lending and given a boost to infrastructure development and construction projects, has also seen a bounce in its manufacturing output.

The CLSA China PMI rose to 50.1 in April from 44.8 in March, the first indication of manufacturing growth since July of last year.

"China's government has been extremely successful in stimulating investment and, combined with a sharp improvement in export orders, this has pushed the PMI back into positive territory in April," CLSA Head of Economic Research Eric Fishwick said in a statement.

The CLSA survey followed Friday's release of China's official PMI, which also pointed to a rebound in manufacturing. The China Federation of Logistics & Purchasing PMI surged to 53.5 in April from 52.4 in March.

The rise in manufacturing activity for both China and India also reflects resurgent demand for products throughout the world. China's new orders subindex rose to 50.9 in April from 43.6 in March. India's new orders index rose to 54.9 from 49.5 in March.

A measure of Chinese export orders rose to 48.8 last month from 41.4.

"Recent economic reports suggest the global recession is abating in intensity," John Kyriakopoulos, head of currency strategy at National Australia Bank Ltd., told Bloomberg.

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