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Manufacturing data today (Monday) confirmed that Asia's economic recovery is gaining strength, and China – whose economy may have expanded at a rate of 9.5% in the fourth quarter – is leading the revival.
The China Federation of Logistics and Purchasing on Sunday said the country's official purchasing managers' index (PMI) rose to 55.2 in December from 54.3 a month earlier. That's the biggest increase since April 2008, and it was aided by an increase in trade. The gauge of export orders rose to 54.5 and the reading for imports climbed to 52.8.
Similarly, the China Manufacturing PMI produced by HSBC Holdings PLC (NYSE ADR: HBC) and Markit Economics jumped from 55.7 to 56.1 last month. The index's average monthly increase in the fourth quarter was the largest on record.
Economists point to these numbers as further evidence of a robust recovery for China's economy, which grew at an 8.9% annualized pace in the third quarter.
"The growth rate in the fourth quarter is likely to be 9.5%," Zhang Liqun, an economist at a think tank under the State Council, told the Financial Times.
Furthermore, there is a growing belief that as the nation's export sector continues to rebound, a jump in manufacturing activity will offset a decline in government spending in the New Year.
"While public investment may moderate in the months ahead, private real estate investment, consumer spending and export demand should drive growth in the coming months," said Jing Ulrich, chairman of China equities and commodities at JP Morgan Chase & Co. (NYSE: JPM). "The improvement in China's trade outlook should alleviate problems with overcapacity in some manufacturing industries and reduce the importance of government-backed investment in the next several quarters."
China's recovery has cleared a path for other Asian nations to return to growth, as well. HSBC's South Korea PMI edged up to 52.8 in December from 52.6 in November. The bank's Taiwan PMI increased to 58.7 from 58.4 – the ninth consecutive monthly increase. And the India PMI compiled by HSBC and Markit rose to its highest level since May to 55.6 from 53.
The Organization for Economic Cooperation and Development (OECD) in November more than doubled its 2010 forecast for developed nations, saying that strong growth in Asia – particularly China – would help pull the "more feeble" West out of its financial malaise.
After predicting in June that the combined economy of its 30 member nations would grow 0.7% in 2010, the OECD raised its forecast for developed economies to grow 1.9% next year and 2.5% in 2011.
The OECD cautioned that the recovery is still fragile in developed nations, while pointing to China as the main catalyst for a global rebound.
"The upturn in the major non-OECD economies, especially in Asia and particularly China, is now a well-established source of strength for the more feeble OECD recovery," said the OECD, whose only two Asian members are Japan and South Korea.
U.S. gross domestic product (GDP) should expand by 2.5% in 2010 and eurozone growth will accelerate to 0.9%, the group said.
News and Related Links:
- Financial Times:
China's economic recovery broadens
- Money Morning:
OECD More Than Doubles 2010 Forecast, as China Leads the World Out of the Recession