Key Points
- Official manufacturing PMI rises to 50.1 from 49.8 in August
- Factory production accelerates, while new orders remain above 50
- Weak employment and smaller firms show recovery remains uneven
BEIJING: China’s factory activity returned to growth in September, with manufacturing production accelerating and overall business activity improving, offering fresh support to the world’s second-largest economy.
The official manufacturing Purchasing Managers’ Index (PMI), a widely watched measure of factory activity, rose to 50.1 in September from 49.8 in August, moving back above the 50-point threshold that separates expansion from contraction.
The September reading reversed the contraction trend of the last two consecutive months and ushered in strong production recovery. The production sub-index rose 1.3 points to 51.7, indicating faster expansion in factory output.
New factory orders above mark
The new orders index remained above the 50-point mark at 50.5, although it slipped slightly from 50.6 in August. New export orders stood at 50.0, unchanged from the threshold separating expansion from contraction.
The improvement was broad enough to lift China’s overall business activity. The composite PMI output index rose 1.2 points to 50.7 in September, while the non-manufacturing business activity index increased to 50.2 from 49.0.
Within non-manufacturing sectors, construction activity rose sharply, with its index climbing 3.4 points to 50.3. Services activity also returned to expansion, rising 0.9 points to 50.2.
However, the data showed that the recovery remains uneven.
The employment sub-index for manufacturing fell to 48.4 from 48.7 in August, below the 50-point threshold. Small and medium-sized manufacturers also remained in contraction, with their PMI readings at 48.9 and 49.7, respectively. Large manufacturers recorded a better reading of 50.6.
The latest figures came as Chinese manufacturers continued to benefit from strong industrial demand, including global demand linked to artificial intelligence-related products. Easing weather disruptions also allowed factories to resume operations.
A separate private-sector survey showed improved manufacturing activity, highlighting differences between the official survey and measures that cover a larger share of smaller and privately owned companies.
According to international reporting, the private manufacturing PMI rose to a five-month high of 52.1 in September.
Despite the factory rebound, domestic demand remains a concern. The official non-manufacturing new orders index stood at 46.5 in September. However, it improved from 44.1 in August. The new orders reading for services was 46.7, while construction recorded 45.7.
The property sector also remained weak, with the National Bureau of Statistics reporting that real estate-related activity was still below the expansion threshold.
China’s September data therefore point to stronger industrial production but continued weakness in employment and parts of domestic demand. Policymakers would be closely watching the figures to support economic growth through targeted measures.
China’s manufacturing sector is an important driver of global trade, making the latest PMI figures relevant beyond the domestic economy.
READ ALSO: China Factory Activity Improves in August: Survey
Changes in factory output, export orders and industrial demand can affect commodity markets, Asian supply chains and manufacturers across major trading economies.
China’s manufacturing sector remains central to the country’s economy and to global supply chains, accounting for a large share of worldwide industrial production and exports.
The sector has faced pressure from weak domestic demand, a prolonged property downturn, cautious consumer spending and uneven investment.
Chinese manufacturers have benefited from strong overseas demand for electric vehicles, batteries, solar equipment, machinery and other high-technology products.
Beijing has been seeking to strengthen domestic consumption while supporting advanced manufacturing and strategic industries.
Trade tensions with the United States and other major economies have also forced Chinese companies to diversify export markets and expand production overseas.
The manufacturing PMI is closely watched because it provides an early indication of changes in factory output, orders, employment and business conditions.
A sustained improvement would provide support for industrial activity, while continued weakness in employment and domestic orders would indicate that broader economic challenges remain.
