An official survey showed that China’s factory activity expanded for the first time in six months in September, adding to a run of indicators suggesting the world’s second-largest economy has begun to bottom out. Based on a survey of major manufacturers, the purchasing managers’ index (PMI) rose to 50.2 in September from 49.7, according to the National Bureau of Statistics, edging above the 50-point level demarcating contraction in activity from expansion and beating a forecast of 50.0.
The reading was the first above 50 since February and bolstered evidence that targeted policies to support the economy were having an impact. And came ahead of the release of data on Thursday showing a rebound in property sales. It also reinforced the view that a slowdown in China, the world’s biggest exporter, is unlikely to derail the global economic recovery.
According to the Caixin survey, manufacturing activity was boosted by a pick-up in demand from domestic markets, based on interviews with factory purchasing managers, and covers a broader range of industries than the official PMI. The survey found a solid increase in production, with firms reporting that new orders grew at the fastest rate since March 2010. This was partly due to a boost from government investment, with a subindex for production pointing to the fastest rise in output in 2022.
An improvement in market demand helped manufacturers increase output at the fastest pace for nine months and boosted hiring activity at the fastest rate for three years. As a result, firms raised selling prices for the first time in four months to offset higher input costs. The overall business climate in September was largely positive, with the survey finding that new work increased and firms took steps to reduce inventory levels.
Outside the manufacturing sector, the nonmanufacturing PMI also returned to expansion in September with a reading of 51.7 versus 51.0 in August. The sub-index for service sector activity also rose, while that for construction slipped.
In other signs of stabilization, retail sales in September jumped at the fastest rate this year, and industrial profits in August climbed to their highest for four years. This week, consumer spending is expected to be buoyant as China marks its most extended public holiday of the year, the Mid-Autumn Festival.
Near-term data on the economy to watch out for include data on industrial output and fixed asset investment later this week and the first official quarterly GDP reading in October. Investors will watch for signs that China’s economy is strengthening, particularly given the recent turmoil in global financial markets. Traders will also await details on the trade talks between Washington and Beijing. The two sides are scheduled to begin a fresh round of negotiations on Friday. (Reporting by Sarah Lai; Editing by Jonathan Webb)
