China factory activity edges up in September
BEIJING (Reuters) — Factory activity surveys in China pointed to slight improvement in September as domestic demand picked up, but analysts believe the gains will be short-lived as the property market cools and Sino-U.S. trade tensions remain elevated.
Persistent weakness in China’s vast manufacturing sector has reinforced market expectations that Beijing needs to roll out more support measures to cushion the country’s worst economic slowdown in decades, even if that risks racking up more debt.
The official Purchasing Managers’ Index (PMI) rose to 49.8 in September, slightly better than expected and advancing from 49.5 in August. But it remained below the 50-point mark that separates expansion from contraction on a monthly basis, data from the National Bureau of Statistics (NBS) showed.
Analysts polled by Reuters had expected the headline reading would be unchanged.
A private business survey also released on Monday showed growth in factory activity unexpectedly quickened to a 19-month high of 51.4 in September, largely due to a rise in domestic orders as government support measures kicked in.
But economists cautioned the rebound is likely be unsustainable, and forecast further economic weakness ahead.
“We believe the official manufacturing PMI may decline again, the growth slowdown could gather pace and (financial)markets could become more volatile in coming months,” economists at Nomura said in a note.
Nomura recently lowered its third-quarter growth forecast for China to 5.9 percent and its fourth-quarter view to 5.8 percent, slowing from the 6.2 percent reported in the second quarter. It cited continued U.S. tariff pressure, slowing industrial production and signs that property investment and construction may be starting to cool.
Total new orders, including those from home and abroad, did swing back to growth in September for the first time in five months, the official PMI showed, but the expansion was marginal.
Moreover, export demand remained weak, with orders falling for the 16th straight month, albeit at a milder pace.
Production rose at a quicker pace in September, buoyed by the growth in new orders. In particular, output in the food processing, textile, special equipment and electrical machinery sectors stood at high levels, Zhao Qinghe, an official with the statistics bureau said in a statement accompanying the data.
“With a slew of growth-boosting policy measures kicking in, optimism among manufacturing firms … reached 54.4, the highest in the third quarter,” said Zhao.
The activity surveys followed unexpectedly weak August data which showed growth in industrial production tumbled to its weakest level in 17-1/2 years, while factory deflation deepened.