China factory activity expands for first time in 3 months, beats expectations in September

China’s factory activity beat expectations and expanded for the first time in three months in September, data released on Friday showed.

The official manufacturing purchasing managers’ index (PMI) rose to 50.1 this month, up from 49.4 in August, according to the National Bureau of Statistics (NBS). The 50-mark separates growth from contraction on a monthly basis.

The official non-manufacturing PMI, which measures business sentiment in the services and construction sectors, fell to 50.6 in September from 52.6 in August.

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“In September, with a series of stimulus packages continuing to take effect, coupled with the impact of hot weather receding, the manufacturing boom has rebounded. The PMI returned to the expansionary range, ” said senior NBS statistician Zhao Qinghe.

“[The non-manufacturing index] remained above the threshold, with the overall expansion of the non-manufacturing sector decelerating.”

All three indices are in the expansionary range this month, and China’s economy is continuing its overall recovery
Zhao Qinghe

The official composite PMI, which includes both manufacturing and services activity, fell to 50.9 in September, down from 51.7 in August.

“All three indices are in the expansionary range this month, and China’s economy is continuing its overall recovery,” Zhao added.

“[The composite PMI] indicates that China’s enterprise production and operation activities continue to expand in general, but the pace of expansion has slowed down.”

Also on Friday, the Caixin/Markit manufacturing PMI fell to 48.1 in September from 49.5 in August, marking the second month of contraction.

“Surveyed enterprises said the pandemic was still the greatest factor of impact,” said Wang Zhe, senior economist at Caixin Insight Group.

“The pandemic situation is still severe and complex, and the negative impact of Covid controls on the economy is still pronounced.

“In September, supply and demand in the manufacturing industry both contracted, the job market was weak, logistics and transportation were slightly sluggish, cost of production and prices charged continued to decline, and purchases and inventories fell slightly. Market optimism also dwindled significantly due to concerns about the economic outlook.”

China’s economy is slowing as a result of its strict coronavirus controls, with pressure mounting on its housing sector and on consumption.

This week, the World Bank cut mainland China’s 2022 GDP growth forecast to 2.8 per cent from 5 per cent, largely due to the impact from its zero-Covid policy.

On Tuesday, it was reported that profits at China’s industrial firms shrank at a faster pace in January-August, falling by 2.1 per cent in the first eight months of 2022 from a year earlier having dropped by 1.1 per cent in the January-July period.

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