China’s factory and services surveys suggest the economy is struggling to rebound

  • China’s official September manufacturing PMI above forecast
  • Private survey shows factory activity has contracted sharply
  • Growth in services sector activity slowed in September – official survey
  • COVID curbs, easing foreign demand, weak real estate weigh

BEIJING, Sept 30 (Reuters) – China’s manufacturing activity slowed growth in September, but slowing service sector growth and a pessimistic survey of private industry pointed to a further slowdown as the economy is struggling with the brakes of COVID-19 and slowing global demand.

The official Purchasing Managers’ Index (PMI) for China’s manufacturing sector rose from 49.4 in August to 50.1 in September, the National Bureau of Statistics (NBS) said on Friday, beating expectations.

The index’s return to growth, after two months of contraction, was helped by recent easing measures, but the Caixin private survey showed factory activity slumped faster in September and the official survey showed a marked slowdown in the growth of activity in the services sector.

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Signs that the world’s second-largest economy is struggling to recover after narrowly avoiding contraction in the second quarter, could add to concerns about a global recession as major central banks embark on a series of most aggressive rate hikes in decades.

“Surveys suggest China’s economy continued to lose momentum in September, with the global slowdown weighing on exports and virus disruptions dealing another blow to services activity,” said Zichun Huang, an economist at Capital. Economics, in a footnote.

Elsewhere in Asia, the data showed South Korea’s industrial production fell for a second month in August, but a separate version showed that Japanese factories increased production again last month.


China’s official manufacturing survey showed factory activity rose slightly in September, beating expectations for a reading of 49.6 in a Reuters poll of economists, and topping the 50 mark. points that separates contraction from growth. The Chinese government has deployed more than 50 political measures since the end of May.

“With the entry into force of the basket of economic policies and the disappearance of the effects of heat waves, the manufacturing sector has recovered, leading the PMI to return to expansionary territory,” said Zhao Qinghe, senior statistician at the NBS. in a press release.

COVID outbreaks have dragged down businesses in retail, aviation, accommodation and food services, Zhao said, adding that a government-led infrastructure surge has accelerated construction activity.

The official survey showed the non-manufacturing PMI fell to 50.6 in September from 52.6 in August. The official composite PMI, which includes manufacturing and services, fell to 50.9 from 51.7.

The Caixin private investigation also released on Friday showed factory activity contracted at a faster pace in September, with production, new orders and employment indices all falling on weak demand. The Caixin survey generally covers small, export-oriented businesses.

The releases come as the yuan hits its lowest level since the 2008 global financial crisis this week, even as the People’s Bank of China (PBOC) made betting against the yuan more expensive and warned against speculative yuan trading.

“Pressure on the yuan also means the PBOC is constrained in its ability to provide monetary support,” Huang added.

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The official manufacturing PMI survey showed the new export orders index fell to 47.0 from 48.1 in August, a trend also reflected in the private Caixin survey. External demand has been affected by rising interest rates, high inflation and the war in Ukraine.

“(The) export orders index continued to slide…indicating weakening external demand as monetary policy tightening sparked fears of recession in developed economies,” it said. Zhou Hao, chief economist at Guotai Junan International.

“If external demand weakens further, China’s economy will have to turn more to domestic demand.”

The official manufacturing survey also showed new orders and employment were declining, albeit more slowly, amid tighter coronavirus restrictions in several cities, including Shenzhen and Chengdu.

The release is one of the last official economic indicators to be announced ahead of China Ruling Communist Party Congress in mid-October.

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Reporting by Ellen Zhang and Ryan Woo; Editing by Ana Nicolaci da Costa

Our standards: The Thomson Reuters Trust Principles.

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