The Purchasing Managers Index (PMI) may rise to as high as 54 in March, indicating a further rebound in domestic manufacturing activity, a report released today by China International Capital Corporation (CICC) projected.
China's PMI was at 49 in February, compared with 45.3 in January, 41.2 in December 2008 and a record low of 38.8 in November, according to the China Federation of Logistics and Purchasing.
The PMI is an extremely important indicator for the financial markets as it is the best indicator of factory production. The index is popular for detecting inflationary pressure as well as economic activity.
A PMI figure over 50 indicates that manufacturing is expanding while anything below 50 means that the industry is contracting.
CICC, a joint investment bank in which Morgan Stanley holds a 34 percent stake, predicted that China's PMI may go up to between 52 and 54 in March. It said GDP growth in the first quarter of this year is likely to rebound from the 6.8 percent level in the last quarter of 2008.
The company said commodity prices would stay at a low level in the short term because of large inventories.