China’s factory output grew at its fastest rate on record in December – a month in which manufacturing activity soared in key Asian production economies.
The HSBC China Purchasing Managers’ Index rose to 56.1, up from 55.7 in November, reaching its highest level since the survey began in April 2004. This growth rate is expected to be sustained, and possibly even accelerated, in the coming months, as export orders improve and domestic public investment remains strong. Also in December, India saw its fastest manufacturing growth for seven months, while South Korea’s manufacturing output was at its highest level since August.
In China, the result of heavy government stimulus spending and the wider availability of bank credit in the first half of 2009 are raising inflationary fears. In December, Chinese manufacturers raised their prices at the fastest rate in 17 months.
Some analysts say, however, that overcapacity in many key industrial sectors and tighter monetary control – last week the Beijing government raised the reserve requirement for Chinese banks in an attempt to drain excess liquidity from the economy – may be enough to stave off the threat of unmanageable inflation. Either way, sourcing and manufacturing companies will need to remain very vigilant on pricing trends in the coming months.
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on Monday, January 18th, 2010 at 2:39 pm and is filed under News commentary.
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Rising Output Brings The Spectre of Inflation
China’s factory output grew at its fastest rate on record in December – a month in which manufacturing activity soared in key Asian production economies.
The HSBC China Purchasing Managers’ Index rose to 56.1, up from 55.7 in November, reaching its highest level since the survey began in April 2004. This growth rate is expected to be sustained, and possibly even accelerated, in the coming months, as export orders improve and domestic public investment remains strong. Also in December, India saw its fastest manufacturing growth for seven months, while South Korea’s manufacturing output was at its highest level since August.
In China, the result of heavy government stimulus spending and the wider availability of bank credit in the first half of 2009 are raising inflationary fears. In December, Chinese manufacturers raised their prices at the fastest rate in 17 months.
Some analysts say, however, that overcapacity in many key industrial sectors and tighter monetary control – last week the Beijing government raised the reserve requirement for Chinese banks in an attempt to drain excess liquidity from the economy – may be enough to stave off the threat of unmanageable inflation. Either way, sourcing and manufacturing companies will need to remain very vigilant on pricing trends in the coming months.
This entry was posted on Monday, January 18th, 2010 at 2:39 pm and is filed under News commentary. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.