BEIJING, Oct 1 (Portal) – China’s factory activity expanded more slowly in September, a private sector survey showed on Sunday, with sluggish foreign demand weighing on the outlook despite rising output.
The Caixin/S&P Global Manufacturing Purchasing Managers’ Index (PMI) fell to 50.6 in September from 51.0 the previous month, missing analyst forecasts of 51.2. The 50 index point mark separates growth from contraction.
The world’s second-largest economy is showing early signs of stabilization after a flurry of modest policy measures, but the outlook is clouded by a housing slump, falling exports and high youth unemployment.
The survey comes a day after China released its official PMI that showed factory activity increased in September for the first time in six months, adding to the array of indicators suggesting the economy has bottomed out.
According to the Caixin PMI, factory output and new orders remained in expansionary territory in September, but external demand remained weak and the export orders index fell in the third month.
“The economic recovery has yet to find a solid footing due to insufficient domestic demand, external uncertainties and labor market pressures,” said Wang Zhe, senior economist at Caixin Insight Group.
Factory owners’ confidence for the coming year hit a 12-month low. The survey showed that manufacturers of consumer goods, capital goods and intermediate goods are all cutting staff.
Input costs rose at their fastest pace since January due to rising prices for chemicals, crude oil and industrial metals.
China’s policymakers face the daunting task of reviving stalled economic growth. Analysts are calling for more aggressive moves on top of the selective support of recent months.
“The implementation and effectiveness of economic stabilization measures should be the next focus,” Wang said. “More efforts may be needed to increase employment and income.”
To support growth, the central bank in September reduced the amount of cash banks must hold as reserves.
“We do not expect any significant fiscal or monetary stimulus from the Chinese authorities in the coming months,” S&P Global Ratings said in a research note. “While the muted policy stimulus causes more trouble for companies and banks, it also shows that China continues to move away from unproductive, debt-fueled growth.”
A separate PMI released on Sunday by Caixin/S&P Global showed China’s services activity grew at its slowest pace in September this year.
Reporting by Liangping Gao and Ryan Woo; Editing by Sam Holmes
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