China Sept factory activity expands

BEIJING • Factory activity in China expanded last month as domestic and export orders rose but the improvement was marginal and manufacturers continued to shed jobs, a private business survey showed yesterday.

The Caixin/Markit Manufacturing Purchasing Managers' Index (PMI) rose to 50.1, in line with analysts' forecasts and a tad higher than August's no-change mark of 50.0, which separates expansion of activity from contraction on a monthly basis.

The reading has bounced around the neutral 50 level for the best part of five years, pointing to sluggish demand.

Output expanded in September, but at the slowest pace in three months, the survey showed. Overall new orders also continued to show modest growth, with new orders edging into expansionary territory after nine months of contraction.

Despite easing to its slowest for nine months, the rate of job shedding remained marked overall. About 8 per cent of firms polled reported lower headcounts, with some attributing the fall to cost-cutting.

The Commerce Ministry said weak global demand is "impossible" to reverse fundamentally this year, though January-August trade figures showed positive signs.

But companies were able to pass along higher input costs and raise selling prices of their goods by a sharper pace than in August, suggesting they were regaining pricing power.

"The readings for the manufacturing PMI over the past three months seem to indicate that the economy has begun to stabilise," Mr Zhengsheng Zhong, director of macroeconomic analysis at CEBM Group, said in a note accompanying the PMI report.

A construction boom fuelled by government infrastructure spending and a housing market rally have helped to underpin growth in the world's second- largest economy in recent months, though small and mid- sized private firms like those which dominate the Caixin survey have continued to struggle.

Profits earned by China's industrial firms grew the fastest in three years in August with rising sales, higher prices and reduced costs, data showed on Tuesday.

The Commerce Ministry had warned on Thursday that downward pressure on China's trade is growing due to various destabilising factors, and said weak global demand is "impossible" to reverse fundamentally this year, though January-August trade figures showed positive signs.

Mr Zhong also cautioned that an increasingly strained fiscal budget could pose a risk to sustainable growth.

"Given that the growth rate of fiscal income has slowed recently while expenditures have swung, there is insufficient momentum to drive future economic growth, and there is a risk that industrial output may decline," Mr Zhong said.

REUTERS

A version of this article appeared in the print edition of The Straits Times on October 01, 2016, with the headline 'China Sept factory activity expands'. Print Edition | Subscribe