September 30: China’s factory activity returned to growth in September, according to official data released on Wednesday. The National Bureau of Statistics (NBS) manufacturing purchasing managers’ index (PMI) rose to 50.1 from 49.8 in August, ending two months of contraction. A reading above 50 means activity is expanding. The services sector also moved back above the 50 mark. But a sharp jump in input prices and weak hiring show the recovery is uneven.
Key highlights
- Manufacturing PMI: 50.1, in line with forecasts and up from 49.8 in August.
- Services and construction: The official non-manufacturing index rose to 50.2 from 49.0, beating the 49.3 forecast. The composite output index rose to 50.7.
- Private survey is stronger: The RatingDog/S&P Global manufacturing PMI rose to 52.1, its highest in five months, against a forecast of 51.6.
- Prices jump: The official index of raw-material purchase prices climbed 4.2 points to 60.8, and factory-gate selling prices rose 3.6 points to 54.0.
- Jobs still weak: The employment sub-index fell to 48.4, which is still in contraction.
Inside the numbers
Production led the rebound, according to NBS figures reported by Shanghai Metals Market. The production index rose 1.3 points to 51.7, while new orders slipped slightly to 50.5. High-tech manufacturing was the strongest area, with a PMI of 52.5. Large companies held steady at 50.6. Medium-sized firms improved to 49.7 and small firms to 48.9, but both are still below the growth line. NBS chief statistician Huo Lihui described the readings as showing “a rebound in economic prosperity.”
The private RatingDog survey, compiled by S&P Global, tends to cover more export-oriented and smaller firms. Its services index rose to 51.6 and its composite to 52.4. According to InvestingLive, Reuters described the official manufacturing reading as broadly in line with the private survey, although the private figure is well above it.
What’s driving it
Easing weather disruptions and the global boom in artificial intelligence hardware helped factories in September, but retail sales and investment remain weak, InvestingLive reported, citing Reuters. The AI-driven electronics boom is the same force behind China’s recent profit figures. Earlier this week we reported that electronics accounted for most of the growth in industrial profits this year, even as overall profit growth slowed sharply in August (our report).
The surge in input costs was driven by higher prices for metals and oil, according to the private survey.
Why it matters for India
China is India’s largest source of imports, from electronics components to machinery and chemicals. A sustained rise in Chinese factory-gate prices would make many of those inputs more expensive for Indian manufacturers. A firmer Chinese economy would also support demand for commodities and for Asian exports more broadly.
What to watch
China begins its week-long National Day holiday on October 1. The next test is whether new orders and hiring pick up in October, and whether Beijing adds further support for infrastructure and technology to lift weak consumer demand.
Sources
- InvestingLive: China official manufacturing PMI returns to growth at 50.1, non-manufacturing 50.2
- Shanghai Metals Market: NBS manufacturing PMI at 50.1% in September
- InvestingLive: China private survey manufacturing PMI (September) 52.1
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