BEIJING (Reuters) - Growth in China's vast factory sector rose to a three-month high in October as smaller firms saw more orders, a private survey showed on Monday, easing fears of a sharp slowdown but still pointing to a sluggish economy that is losing momentum.
The final HSBC/Markit Manufacturing Purchasing Managers'Index(PMI) edged up to 50.4 in October, up from the September's reading of 50.2, but unchanged from a preliminary reading.
However, while the headline number looked slightly better, growth rates slowed in several key areas heading into the fourth quarter, putting the government's full-year growth target of 7.5 per cent further in doubt.
Growth in new orders and new export orders - proxies for domestic and foreign demand, respectively - fell to their lowest in four to five months, but managed to hold above the 50-point level that separates growth from contraction on a monthly basis.
The level of output in factories also fell to a five-month low of 50.7.
"Overall, the manufacturing sector continued to stabilise in October, however the sequential momentum likely weakened," said Hongbin Qu, chief economist for China at HSBC. "We still see uncertainties, given the property downturn as well as the slow pace of global recovery, and expect further monetary and fiscal easing measures in the months ahead," Qu said.
Lacklustre final demand also weighed on the labour market, which shrank for 12th consecutive month in October, though the rate of job-cutting stayed at the slowest since July.
A similar survey by China's National Bureau of Statistic(NBS) released on Saturday showed factory activity unexpectedly fell to a five-month low last month as firms struggled with slowing orders and rising borrowing costs.
The official Purchasing Managers' Index (PMI) eased to 50.8 in October from September's 51.1, the National Bureau of Statistics said on Saturday. Analysts polled by Reuters had forecast a reading of 51.2.
The official PMI is focused on larger, state-owned factories, as opposed to the HSBC/Markit PMI which focuses more on smaller manufacturers in the private sector.
An official reading on the services industry earlier on Monday showed growth in that sector hit a nine-month low in October as the cooling property sector weighed on demand.
The official non-manufacturing Purchasing Managers' Index (PMI) fell to 53.8 in October from September's 54.0, the National Bureau of Statistics said. But the reading was still comfortably in expansion territory.
The services sector has been more resilient than the manufacturing sector and is creating more jobs, which partly explains why the government has so far refrained from more aggressive policy easing to support the slowing economy.
Hurt by unsteady exports, a housing downturn and cooling investment growth, the Chinese economy is in danger of missing the government's growth target this year for the first time in 15 years.
Third-quarter growth of 7.3 perc ent was the weakest since the global financial crisis.
Most analysts believe authorities will continue to roll out modest support measures in coming months to lift activity, but they are divided over whether it would act more aggressively, such as by cutting interest rates, unless there is a risk of a sharper slowdown.
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