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China factory activity picks up to beat expectations Chinese manufacturing continues to contract in September
(about 7 hours later)
Factory activity in China picked up in September, beating expectations, according to the government's official manufacturing survey. Factory activity in China continued to contract in September, according to the government's official manufacturing survey.
The manufacturing purchasing managers' index (PMI) was up to 49.8 from 49.7 in August, but the sector did shrink for the second consecutive month. Although the manufacturing purchasing managers' index (PMI) rose slightly to 49.8, up from 49.7 in August, the sector contracted for the second consecutive month.
A number below 50 indicates factory activity contracted, while one above shows expansion in the sector. A number below 50 indicates that factory activity contracted.
China's vast manufacturing sector has been struggling to regain momentum.China's vast manufacturing sector has been struggling to regain momentum.
Economists were expecting the official PMI to come in at 49.6, which would have been the weakest level since August 2012. The official PMI figure was a touch better than the 49.6 expected by economists.
'Policy support measures' Cloudy outlook
Julian Evans-Pritchard, economist at research firm Capital Economics said the better-than-expected data shows that policy easing by the government is helping to boost economic activity. Even though this month's reading was slightly better than forecast, it still shows that economic conditions in China remain under a cloud.
"Looking ahead, we expect sentiment to begin to improve gradually over the coming months as the stock market stabilises and recent policy support measures continue to feed through into stronger economic activity," he said in a note on Thursday. The world's second-largest economy is on track to expand at its slowest pace in a quarter of a century.
Even though this month's reading was slightly better than forecast, it still shows that conditions in the country known as the "workshop of the world" are not as rosy as they were. The government expects China to grow by 7% this year, but a spate of weak economic data has raised questions about whether that target will be achieved.
The world's second largest economy is on track to grow at its slowest pace in a quarter of a century. "Two straight months of manufacturing sector contraction with a depressed equity market suggests China's third-quarter GDP growth is likely to have slowed to 6.4%," economists at ANZ said.
The government expects China to grow 7% this year, but a spate of weak economic data has raised questions about whether the Asian giant will miss that target. ANZ believe that growth could pick up again later this year as stimulus measures and higher government spending gradually take effect.
Julian Evans-Pritchard, economist at Capital Economics, said: "We expect sentiment to begin to improve gradually over the coming months as the stock market stabilises and recent policy support measures continue to feed through into stronger economic activity."
Official vs privateOfficial vs private
The official data looks at activity amid larger manufacturers, while a private survey from Caixin and Markit focuses on smaller to mid-size businesses in the sector. The official PMI data looks at activity amid larger manufacturers, while a private survey from Caixin and Markit focuses on smaller to medium-sized companies in the sector.
The final Caixin/Markit manufacturing PMI for September declined to a six-and-a-half year low of 47.2, but it was better than a preliminary reading of 47 released last week. The final Caixin/Markit manufacturing PMI for September fell to a six-and-a-half year low of 47.2, but it was better than a preliminary reading of 47 released last week.
Asian markets reacted positively to the closely watched Chinese data, with Japan and Australia gaining 1% in morning trade. Asian markets reacted positively to the closely watched Chinese data, with the Hang Seng in Hong Kong rising 1.4% in afternoon trade and Tokyo up 1.9%.
Chinese markets are closed until 7 October for public holidays.Chinese markets are closed until 7 October for public holidays.