International | Jul 03 2006
The health of China’s manufacturing sector has rarely been better, according to CLSA Asia Pacific Markets, with manufacturing production rising for the seventh consecutive month at a "solid pace" in June.
CSLA’s China Purchasing Managers’ Index (PMI), which is a composite indicator that provides a single figure snap-shot of the manufacturing sector’s health, stands at 52.9, its highest level in thirteen months, and higher than the average to date.
The rise in the PMI was supported by increased output and new order growth, CSLA says, with companies reporting "robust demand conditions" both domestically and in foreign markets.
However, the latest data also showed evidence of capacity pressures with backlogs of unfinished work rising once again in June, and average lead times lengthened at the "sharpest rate for fourteen months," with reports of shortages of certain types of raw materials as well as disruption to transport networks, CLSA says.
Operating costs also rose steeply in June, with input price inflation rising to its highest level in over 21 months. Copper, chemicals, oil and steel prices were all reported as rising.
While some of these increased costs were passed on in the form of higher prices, "charge inflation remained well below that of input prices," CLSA adds.
By Terry Hughes
