Manufacturing activity resumed expansion for the first time in half a year, adding to signs that the economy has bottomed out and may recover steadily in the fourth quarter, experts said. Nevertheless, continuous policy support is still crucial, given the sustained difficulty of small businesses, they said, with monetary policy to remain accommodative and additional government spending likely in the rest of the year. The comments came after the National Bureau of Statistics (NBS) said that the official purchasing managers index (PMI) for the manufacturing sector came in at 50.2 in September, above the boom-bust line of 50 for the first time in six months and rising for the fourth consecutive month.
September’s PMI reading was up from 49.7 in August because production accelerated while market demand improved, especially export orders, the Bureau said. The improved reading has further bolstered analysts’ confidence in China’s recovery prospects, following encouraging data for August, when the profits of industrial enterprises and consumer inflation both resumed positive growth on a year-on-year basis. “The pace of China’s economic rebound has stabilized and is moving upward,” said Zhong Zhengsheng, Chief Economist at Ping An Securities. He added that September’s PMI indicates that the drag from external demand has eased, policies on infrastructure and real estate have promoted a recovery in related industries, and the mitigated debt burden of households is boosting the sectors of consumer goods and services.
With activity in services and construction sectors accelerating, the composite PMI, which includes both manufacturing and non-manufacturing activities, came in at 52 in September, up from 51.3 in August, indicating an acceleration in overall business activity, according to the NBS. Experts said the official manufacturing PMI may remain above 50 for the remainder of the year. “The economic momentum is expected to strengthen steadily in the fourth quarter and pick up further through 2024, with the help of well-calibrated and targeted policies and a gradual recovery in external demand,” said Hoe Ee Khor, Chief Economist of the ASEAN+3 Macroeconomic Research Office.
The country’s inflation may also recover, with the year-on-year decline in the producer price index, a gauge of factory-gate prices, likely to narrow from 3% in August to about 2.4% in September, said Wen Bin, Chief Economist at China Minsheng Bank. Despite the overall improvements, NBS data showed that activities at small manufacturers still contracted, with their PMI standing at 48 in September, up from 47.7 in August. Also, the manufacturing PMI published by Caixin Group slipped from 51 in August to 50.6 in September as employment declined. Zhao Qinghe, NBS Statistician, said, “It is necessary to focus on implementing the policy measures that have been introduced and bringing their effects into play to further consolidate the continuously improving economic conditions.” Zhao added that the number of manufacturers reporting heightened industry competition, high raw material costs and tight cash flow increased in September, the China Daily reports.
