BEIJING (AFP) – A closely watched indicator of Chinese manufacturing turned positive for the first time in four months in August, HSBC said Thursday, in a sign of renewed strength in the world's second-largest economy.
The banking group said the preliminary reading of its purchasing managers' index (PMI) came in at 50.1 for the month, up from July's final result of 47.7, which was an 11-month low.
The PMI tracks activity at China's factories and workshops and is a closely watched gauge of the health of the economy. A reading below 50 indicates contraction, while anything above signals expansion.
The result was the highest in four months and suggested China's economy was stabilising, HSBC said.
It brought the index back into expansion mode by the smallest of margins, and near the level of the most recent Chinese official assessment of manufacturing.
Results announced earlier this month by the National Bureau of Statistics showed that official PMI rose to 50.3 in July from 50.1 in June. China is expected to announce the official August PMI on September 1.
"China's manufacturing growth has started to stabilise on the back of modest improvements of new business and output," Qu Hongbin, HSBC's chief economist for China based in Hong Kong, said in the bank's statement announcing the figure.
He attributed the improvement to "initial filtering-through" effects of recent policy measures to boost the economy as well as restocking of inventories.
"We expect further filtering-through, which is likely to deliver some upside surprises to China's growth in the coming months," he added.
Fears over China's economic outlook were rampant during the first six months of the year as growth slowed.
Positive data for July, including an acceleration in industrial production to a five-month high, have helped improve sentiment that China's downtrend may have hit a bottom for the time being.
Zhang Zhiwei, economist at Nomura International in Hong Kong, said the HSBC PMI result was "driven by domestic demand" and reflected recent strength in other indicators.
"It confirms that the economy has stabilised in the short term and downside risks" for the year's second half have "declined", he said in a report.
HSBC said it would announce final PMI results on September 2.