Manufacturing activity powered ahead in China and Japan in September, providing fresh evidence of a global recovery, boosted by new orders from their home markets and abroad. Japanese manufacturing grew at its fastest pace in three years, while factories in China cranked up production for the sixth straight month, private activity indexes showed.
A purchasing managers' index on China showed a 4 trillion yuan ($585 billion) government stimulus programme and ultra-loose growth-supportive policy continued to bolster the domestic economy, while global demand for Asian goods slowly recovered. Chinese manufacturers hired workers at the fastest pace in 25 months to keep up with the surge in business.
HSBC's China Purchasing Managers' Index (PMI) showed factory output expanded for a sixth straight month. At 55.0, the reading was little changed from August's 16-month high of 55.1. "Although the headline PMI remained broadly unchanged from the previous month, there was a marked expansion of manufacturing employment in September," Qu Hongbin, chief China economist with HSBC in Hong Kong, said in a statement.
New orders continued to grow quickly, signalling that the recovery in demand from both domestic and external sources was on track, Qu added. Export orders increased at their second-fastest rate in 27 months, while overall new orders were even stronger. In Japan, the Nomura/JMMA Manufacturing Purchasing Managers Index (PMI) rose to 54.5 in September, from 53.6 in August.
It remained above the 50 threshold that separates contraction from expansion for the third month in a row. The index for new export orders rose to a seasonally adjusted 54.1 from 53.2 in August, the eight month of improvement, largely on stronger demand from China. Japan's economy returned to growth in the second quarter, making it the third G7 country after France and Germany to emerge from recession, as exports rebounded and government subsidies at home lifted private consumption.
But Japanese exports slipped for a second month in August in a sign that the impact of stimulus measures in major economies world-wide may be starting to wane. Official industrial output data for August on Wednesday also showed signs of potential weakness.
Output rose 1.8 percent from July, the sixth straight month of gains. But it was smaller than a 2.1 percent gain in July and a 1.9 percent rise that had been forecast by economists polled by Reuters.
In addition, manufacturers expect a further slowdown in September, the output report said. Highlighting the patchiness and fragility of the global recovery, export powerhouse South Korea reported industrial output fell a seasonally adjusted 1.3 percent in August from July, missing market expectations and ending a seven-month gaining streak.
Most economists expected output to rebound in September as export demand was seen strong. A surprise drop in US consumer confidence reported on Tuesday, however, could dash hopes for a relatively quick and strong global recovery. The United States reports its final figures for gross domestic product in the second quarter later on Wednesday. Economists expect the preliminary report that showed an annualised 1.0 percent fall in GDP to be downgraded to a fall of 1.2 percent.
In another sign of recovery, stronger-than-expected retail sales in Australia added to market expectations that its central bank could start to raise interest rates as early as November as the economy regains momentum, while business confidence in New Zealand climbed to its strongest level in a decade.
Australia's August retail sales climbed 0.9 percent, nearly twice as much as had been expected, while personal borrowing, such as on credit cards, rose for the first time in 11 months. Australian interest rates will need to be raised in a "timely" way as demand picks up and record-low interest rates threaten to fuel inflation and create economic imbalances, the country's top central banker said on Monday.
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