China’s factory activity contracts less than expected in September

China’s factory activity contracts less than expected in September


A worker assembling a loader transmission mechanism at a manufacturer in Qingzhou, China.

Nurphoto | Nurphoto | Getty Images

China’s factory activity contracted for a fifth consecutive month in September as the world’s second-largest economy struggles to revive its growth momentum.

The official manufacturing purchasing managers’ index came in at 49.8 in September, compared with 49.1 in August, 49.4 in July and 49.5 in June, according to data from the National Bureau of Statistics released on Monday. 

A PMI reading above 50 indicates expansion in activity, while a reading below that level points to contraction. The data beat the 49.5 expected among economists polled by Reuters.

Zhao Qinghe, senior statistician at NBS, said that the overall economic sentiment has improved with PMI rising to 49.8%, and that manufacturing activities have picked up speed, with high-tech manufacturing and equipment manufacturing continuing to lead.

However, China’s Caixin PMI was 49.3, compared to 50.4 in August, according to the private survey compiled by S&P Global.

The Caixin data released on Monday indicated that China’s manufacturing sector experienced its sharpest contraction in 14 months in September, driven by declining demand and a weakening labor market.

Headwinds for the manufacturing sector has continued to mount as a prolonged economic slowdown and property crisis dampen domestic demand. Meanwhile, Western restrictions on Chinese exports, including electric vehicles, has added to concerns. 

The data is the latest in a slew of disappointing Chinese economic signposts. The world’s second-largest economy is still struggling with weak domestic demand, a downturn in the housing sector and rising unemployment.

China’s industrial profits in August plunged by 17.8% from a year ago, marking the largest decline in over a year, according to data released by the National Bureau of Statistics on Friday.

China’s retail sales, industrial production and urban investment all grew at a slower pace than anticipated last month, with retail sales increasing by 2.1% and industrial production rising by 4.5% from a year ago.

Last week, The Chinese government intensified its efforts to shore up the country’s lackluster economic growth. The People’s Bank of China cut the reserve requirement ratio or RRR, the amount of cash that banks need to have on hand as reserves, by 50 basis points. It also lowered the seven-day reverse repurchase rate from 1.7% to 1.5%, a decrease of 20 basis points.

China’s top leaders on Thursday also convened a high-level meeting chaired by President Xi Jinping, where they called for an end to the property decline, and emphasized the need for stronger fiscal and monetary policy support.

Following the announcements, Chinese equity markets rallied, with markets clocking their best week in almost 16 years.

This is a developing story. Please check back later for updates.



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