MANUFACTURING GROWTH in China and India powered ahead last month and British industry also picked up steam, countering sluggishness in the US economy and a faltering Japanese recovery.

Two surveys of Chinese executives published yesterday showed broad-based strength in the manufacturing sector of the world’s second largest economy and helped boost Asian shares.

The official purchasing managers index (PMI) rose to a six-month high in October of 54.7 from 53.8 in September, easily beating market forecasts of 52.9. A figure above 50 denotes expansion and below 50 indicates contraction.

Manufacturing in India – Asia’s other emerging powerhouse – put in a performance every bit as strong as China’s. The HSBC Markit PMI for India, Asia’s third largest economy, rose to 57.2 in October from 55.1 in September.

“The manufacturing sector remains supported by strong local consumption growth, and growing employment suggests that domestic demand will remain robust,” said Frederic Neumann, co-head of Asian Economics Research at HSBC.

The strength of China’s official PMI was especially striking because the index normally heads down in October, according to Yu Song and Helen Qiao, Goldman Sachs economists. “The fact that the PMI went up despite this seasonal bias suggests real activity growth was likely to have been exceedingly strong in October,” they said in a note.

The survey showed manufacturers continued to run down stocks last month to meet rising domestic orders. “These readings bode well for a recovery of output in coming months,” Ting Lu at Bank of America Merrill Lynch said.

A companion PMI produced by Markit for HSBC painted a similar picture, rising to 54.8 from 52.9 – one of the largest month-on-month rises in the history of the survey.

Calling the official PMI one of the best leading indicators of the economy, Mr Lu said the October report supported his forecast of 9.3 per cent year-on-year growth in gross domestic product in the fourth quarter and 10.3 per cent for all of 2010. – (Reuters)