Investors in natural resources stocks can take heart from the performance of China's manufacturing sector over the closing months of 2012. Official data showed that activity expanded in December for a third consecutive month, lending weight to the view that - following a prolonged downturn - the world's second largest economy actually bottomed out during the third quarter. According to China's National Bureau of Statistics, the official purchasing managers' index (PMI) stood at 50.6 in December, unchanged from the previous month. (A measure above 50 points to expansion.)
Although the accuracy of China's state economic statistics has occasionally been brought into question, the positive trend reflected in the official figures was even more pronounced in the parallel PMI measure published by
The figures would have pleased officials in Beijing, particularly as central government has been trying to reduce China's dependence on export markets; a vital objective given the relentless rise in the country's labour costs. There is also evidence to suggest that activity is beginning to pick up in residential construction after a lull brought about by measures that were introduced to deter speculative investment in property.
This is potentially good news for iron ore prices, which slumped to a three-year low of $90 (£56) a tonne in September, forcing some big producers like