China’s manufacturing sector slowly recovers in September

Last month’s PMI was still below the year-to-date average.

Factory activity in China improved for two months in a row in September as production slowly picked up to keep up with the recovering demand, a latest industry survey by S&P Global showed.

The Caixin/S&P China general manufacturing purchasing managers’ index (PMI) slid to 50.6 last month from 51 in August, signalling continued improvement in the overall health of the manufacturing sector albeit at a slower rate.

S&P said the latest headline PMI, which stayed above the 50.0 neutral mark that separates expansion from contraction, remained slightly lower than the average reading seen year to date.

Domestic factories saw output rise to a four-month high in September as some ramp up production to meet recovering demand, while others work on their backlogs. 

New orders also posted a modest increase last month despite continued decline in exports as domestic demand remained robust. Employment numbers, meanwhile, dipped in September due to the cost cutting initiatives rolled out by the companies.

Higher production levels also meant companies boosted their purchasing activity that month, although they were met with the continued rise in costs of raw materials. The study showed firms likewise raised their selling prices for the first time in seven months and at a rate not seen since March of last year.

For the coming year, Chinese manufacturers were still confident that output will keep on rising on the back of robust customer demand and investments in new equipment. The level of optimism, however, dipped to a 12-month low due to weak global economic outlook.

“Various important economic indicators have shown marginal improvement, and the macroeconomy has shown signs of stabilization. However, the economic recovery has yet to find a solid footing, with insufficient domestic demand, external uncertainties, and pressure on the job market,” said Wang Zhe, senior economist at Caixin Insight Group.