China's manufacturing sector grew last month at the fastest pace since April 2008, according to the country's official purchasing managers' index released on Sunday.
Analysts said the survey results confirmed that the country's economic recovery was broadening as recovering export demand and consumption joined government stimulus as drivers of growth.
The China Federation of Logistics and Purchasing said its index rose to 55.2 from 54.3 a month earlier, the eighth straight monthly reading above 50, the threshold marking economic growth.
The index had dropped to 38.8 last November but moved back into positive territory in March this year.
The reading for new export orders rose to 54.5 from 53.3 in September, and imports, which had lagged the overall index in showing recovery, jumped to 52.8 from 50.7 a month earlier.
Zhang Liqun, an economist at a think tank under the State Council, China's cabinet, said the broad recovery in demand reflected in these readings was an indication that economic growth would accelerate. "The growth rate in the fourth quarter is likely to be 9.5 per cent," he said.
The government has said that gross domestic product increased by 8.9 per cent in the third quarter and 7.9 per cent in the second.
The survey's October results looked particularly strong compared with past readings for the same month. "Although the official PMI is supposed to be seasonally adjusted already, it still exhibits a clear and strong seasonal pattern," said Yu Song and Helen Qiao, economists at Goldman Sachs, in a note to clients. "Since the start of the series in 2005, its October readings were 1.0 per cent, 2.3 per cent, 2.9 per cent, and 6.6 per cent lower than September readings in 2005, 2006, 2007 and 2008 respectively."
Jing Ulrich, chairman of China equities and commodities at JP Morgan, said the recovery in demand would help offset a possible slowdown in government spending. "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," she said.
Ms Ulrich pointed to the dominant role construction plays in the Chinese economy and said a sharp rebound in new housing construction starts in September boded well for the months ahead.
"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," she added.
© The Financial Times Limited 2009
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