BEIJING (Reuters) - China's vast factory sector grew a shade faster in October as firms drew more foreign and domestic orders, a private survey showed on Thursday, though the modest expansion likely won't dispel concerns about the cooling Chinese economy.
The flash HSBC/Markit manufacturing purchasing managers'index (PMI) edged up to a three-month high of 50.4 from a final reading of 50.2 in September, and just a hair's breadth from the 50.3 reading forecast by analysts.
Underscoring the pressures facing China's economy, growth in new orders at home and abroad slowed in October and producer prices fell, pushing factory inflation to a seven-month low.
The level of output in factories also fell to a five-month low of 50.7, just above the 50-point level that separates growth from contraction on a monthly basis.
"While the manufacturing sector likely stabilised in October, the economy continues to show signs of insufficient effective demand," said Hongbin Qu, chief economist for China at HSBC. "This warrants further policy easing and we expect more easing measures on both the monetary as well as fiscal fronts in the months ahead," Qu said.
Asian stock markets reversed early losses after the survey, while the Australian dollar edged up initially but gains fizzled.
A sagging housing market, sluggish domestic demand and erratic exports have dampened Chinese activity this year. While exports have recently shown signs of picking up, the property market and investment continue to cool and many companies are being pinched by tighter credit, weighing on the broader economy.
The world's second-largest economy grew at its slowest rate since the global financial crisis in the September quarter, data showed earlier this week, adding to worries that it would drag on global growth.
Annual economic expansion appears likely to miss the official 7.5 per cent target this year to hit a trough not seen since 1990. Yet, analysts are divided over whether authorities will loosen policy more aggressively in coming months to bolster activity.
Premier Li Keqiang has publicly stated that China can ill afford to further relax credit policies to lift its economy, in a nod to criticisms that years of brisk money growth in the country has fuelled potential bubbles and financial risks.
