China CFLP Sep Manufacturing PMI Surges to Highest in 5 Years

--Official Mfg PMI Above 50 For 14th Consecutive Month

--Official Services PMI Rose to 55.4 from 53.4 in Aug

     BEIJING (MNI) - PMI data released Thursday by the China Federation of

Logistics and Purchasing:

           Manufacturing PMI  Services PMI

------------------------------------------

September               52.4          55.4

August                  51.7          53.4

     Note: Readings above 50 indicate expansion in the sector, while readings

below 50 signal contraction. The higher the PMI reading above 50, the faster the

expansion in the sector. The lower the reading below 50, the faster the

contraction.

     FACTORS:

     --Manufacturing new orders index rose to 54.8 in Sept. from 53.1 in Aug.

     --Manufacturing production index rose to 54.7 in Sept. from 54.1 in Aug

     --Input price index rose to 68.4 in Sept. from 65.3 in Aug.

     --Business expectations index fell to 59.4 in Sept. from 59.5 in Aug.

     --New export orders rose to 51.3 in Sept. from 50.4 in Aug.

     TAKEAWAYS: The official China manufacturing purchasing managers index

(PMI), jointly released by the China Federation of Logistics and Purchasing

(CFLP) and the National Bureau of Statistics, rose to 52.4 in September from

51.7 in August. The index was the highest level since April 2012, when it was

53.3. 

     The surge in the Sept. manufacturing PMI was unexpected, with the median

forecast of an MNI survey showing an expectation that the index would ease back

to 51.6. The September reading was the 14th consecutive month manufacturing

sentiment has been above the 50-point mark, which divides expansion from

contraction. And this was also the 12th consecutive month that the index has

been above the 51-point market. 

     The main forces contributing to the rise were input and output prices.

Input prices accelerated to 68.4, the highest reading this year, jumping from

65.3 in August. Output price rose to 59.4, also the highest reading this year,

from 57.4 in August. 

     The gap between input and out prices continued to expand to nine percentage

points from the previous 7.9 points, indicating rising prices of raw materials

are squeezing company profits. 

     "Over 40 percent of manufacturers complained about the higher cost due to

the rising prices of raw materials, particularly middle- and

downstream-companies," Zhao Qinghe, economist with the NBS said in a separate

statement. 

     The main sub-indexes that make up the PMI showed positive momentum in

September. Production rose 0.6 percentage point to 54.7, while  overall new

orders rose 1.7 percentage points to 54.8, due to further improvements in

demand, the NBS said. The new orders index was the highest in five years. 

     "New order growth has exceeded the increase in production this year,

showing that the demand-supply relationship has trends toward further balance,"

Zhao said.

     The exports order index rose to 51.3 from 50.4 in August, the second

highest level this year. The imports sub-index fell slightly to 51.1, 0.3

percentage point lower than last month. 

     Manufacturers' confidence about the future eased in September but remained

at a high level. The business expectations sub-index fell to 59.4 from 59.5 but

was still the second highest this year.

     Among the other 13 sub-indexes that make up the PMI manufacturing index,

raw material inventories, finished good inventories, orders on hand, supplier

delivery times and employment were all below 50, the point that separates

expansion from contraction.

     The inventories of finished products continued to decelerate to 44.2 from

45.5 in August, the fifth months consecutive fall.

     The raw material inventories index inched up to 48.9 from 48.3 in August as

the manufacturers added stocks of production inputs on the rise in new orders

and growth in prices.  

     The employment index also dipped to 49.0 from August's 49.1.

     By enterprise size, business activity among big manufacturers expanded at a

faster rate, with the index rising to 53.8, up 0.1 percentage point from August.

Sentiment among medium-size manufacturers increased 0.1 percentage points to

51.1, and that among small ones rose 0.3 percentage points to 49.4, according to

the NBS statement.

     "The domestic base for good, stable economic momentum has been forged and

positive drivers have taken the leading force," said Chen Zhongtao, an economist

with the CFLP. "The good trend is expected to continue next quarter."

     However, the rising prices of raw materials, particularly in the energy

sector due to the government's environmental protection campaign, is still

putting pressures on manufacturers, Chen warned. 

     In addition, the volatility of the exchange rate has increased trading

risks, Chen said. "13.4 percent of companies have mentioned the problem during

our survey, 2.6 percentage points higher than in August."

     The CFLP services PMI rose in September to 55.4 from 53.4 in August, back

above the 54 mark. 

     The CFLP attributed the growth to robust new orders and higher input

prices. 

     "The increasing demand will continue to boost the growth of the service

sector, particularly when it is approaching the long [National Day] holiday,"

said Wu Wei, an economist with CFLP.

--MNI Beijing Bureau; +86 (10) 8532 5998; email: marissa.wang@marketnews.com

--MNI BEIJING Bureau; +1 202-371-2121; email: john.carter@mni-news.com

[TOPICS: MTABLE]