From Goldman Sachs:
An improvement in the October HSBC/Markit flash PMI data suggests manufacturing growth has been accelerating. This is a significant piece of information because although official activity data (including industrial production [IP], retail sales and fixed asset investment [FAI]) rebounded in September their strong readings were not consistent with other non-NBS data such as electricity production and the HSBC/Markit PMI (the official PMI rose but it's hard to interpret because of potentially unstable seasonal bias).
We believe the rebound is likely helped by continued strength in exports growth and a pickup in domestic FAI growth helped by more fiscal supports and ample overall liquidity conditions.
While the external demand outlook remains highly uncertain, the baseline forecasts of stronger sequential growth made by our Global Economics Team point to a relatively benign outlook which are consistent with recent data including: (1) the latest October exports data out of Korea; (2) the sequential pickup in our Global Leading Indicator which rose for three consecutive months after falling continuously between December 2011 and July 2012; (3) the exports orders index of both official and HSBC/Markit PMIs.
Domestically, the government has been stepping up its fiscal support for FAI-related projects and kept overall liquidity conditions measured by broad money supply (M2) and Total Social Financing loose.
Upstream prices continued to rebound rapidly which is consistent with stronger demand growth. We expect another sequential rise in PPI. Its yoy is likely to rise for the first time since the start of the 2012 (though still negative).
