China says manufacturing recovery continues

@CNNMoney May 1, 2012: 8:17 AM ET

NEW YORK (CNNMoney) -- China's government says manufacturing activity continued to recover in April, with an index of purchasing managers' sentiment rising for the fifth straight month.

The index released Tuesday by the National Bureau of Statistics rose to 53.3 in April from 53.1 the previous month. The index bottomed out at 49 in November. Index readings of more than 50 indicate expansion in the manufacturing sector; readings below 50 indicate contraction.

The Chinese government's report has been more positive than a separate, closely watched report from the banking company HSBC. In its preliminary April report, released April 23, the HSBC index rose to 49.1 from 48.3 in March -- an improvement that still indicates contraction. The final report will be released Wednesday.

The government reading is "skewed towards larger firms and so probably exaggerates the sector's recent strength," wrote Mark Williams, chief Asia economist for Capital Economics, in a note Tuesday.

Nevertheless, he said the strength of the government's reading "adds to the evidence that conditions in manufacturing have stopped deteriorating."

Tuesday's reading for production at Chinese factories edged up to 57.2 from 55.2. But the index for new orders slowed, slipping to 54.5 from 55.1, indicating that the recent rebound in manufacturing could be reversed.

China's economy, driven by its manufacturing sector, has become an important driver of global economic growth.

As global economic growth has slowed in the last year and Europe has edged toward recession, there have been growing fears that China could experience a so-called hard landing, a much sharper-than-expected slowdown in the economy.

While emerging economies such as China still report strong overall growth, a slowdown in growth in developed economies has cut into demand for goods from those markets.

Last week, the initial reading on first quarter U.S. gross domestic product, the broadest measure of the nation's economic health, was weaker than expected, and a separate report Monday showed weaker-than-expected spending by U.S. consumers in March.

Europe is the major market for Chinese goods. But with Spain's economy falling into a recession, there are now 12 nations in the European Union that have suffered from their gross domestic product falling for at least two quarters in a row, a benchmark often used to determine a recession.

The overall EU and eurozone could well be determined to be in recession when a report is released May 15. To top of page

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