Official Chinese April PMI jumps to 58.1 from 55.3

BEIJING, May 1 (Reuters) China's official purchasing managers' index for April jumped to a 15-month high, underscoring broad-based economic strength that prompted the central bank to raise interest rates last week.

The index, designed to give a timely snapshot of the industrial sector, rose to 58.1 in April from 55.3 in March, the China Logistics and Purchasing Association said on Monday.

It was the highest reading since January 2005.

A figure over 50 indicates an expansion of activity while one below 50 suggests contraction.

The association, which compiles the index on behalf of the National Bureau of Statistics, said the increase in April showed the manufacturing economy gaining momentum.

The sub-index for new orders was 65.1 in April, up 4.4 points from March, while that for export orders rose 3 points to 61.7.

''The April PMI data shows that the acceleration in economic growth is more evident,'' the association quoted government economist Zhang Liqun as saying.

The sub-index for prices of goods purchased jumped 8.2 points from March to 63.3. The association said the leap ''deserves our attention as it indicates a trend of sharp price rises''.

The People's Bank of China raised its benchmark one-year lending rate last Thursday to 5.85 percent from 5.58 percent and instructed banks to rein in lending to sectors where investment is excessive.

The tightening steps followed an acceleration in the annual growth of gross domestic product to 10.2 percent in the first quarter, from 9.9 percent in the final three months of 2005, fuelled by a surge in investment and credit.

''Overall, I believe that fiscal and monetary policy should be kept stable, but some fine-tuning is necessary,'' Zhang said.

He said the momentum behind the economy was not as strong as it was in the first quarter of 2004.

Then, annual growth in fixed-asset investment exceeded 50 percent. The government responded in late April 2004 with an increase in banks' reserve requirements, a blanket ban on new lending and a host of administrative controls to cool investment in targeted sectors. It followed up in October 2004 with the first interest rate increase in 9 years.

Central bank governor Zhou Xiaochuan said on Friday he had raised rates last week because the economy was ''a little bit hot'' and required some fine-tuning.

REUTERS PV SSC1228