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Chinese industry still contracting: manufacturing indices

Chinese manufacturing activity improved slightly in September while growth in service industries slowed due to disruptions from a massive military parade, surveys showed Thursday.

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“Even though the PMI recovered, it was still below the 50-point level and lower than the same historical period”, Zhao Qinghe, an official at the bureau said in a statement.

A reading over 50 points suggests an expansion in activity while one below that level points to an contraction on a monthly basis.

New export orders fell at a faster rate in September, sliding to 44.6 – a low not seen since March 2009 – and well below August’s 46.6. Manufacturing, however, also faces ongoing downward pressure from weak foreign demand and official efforts to make consumption a bigger part of the Chinese economy. The PMI data could add to concerns that Japan’s economy is stalling again, after an unexpected fall in August industrial production stunned economists.

But new export orders contracted for a 12th straight month, albeit at a slightly less alarming pace. Manufacturers trimmed workforces at about the same rate as in August, while service providers continued to increase payrolls.

Sluggish demand forced factory owners to continue laying off more employees, with the employment sub-index at 47.9, the same as in August. “With the world so sensitive to China’s growth prospects, today’s manufacturing and services reports could drive sentiment”, wrote Chris Weston, chief market strategist at IG in Melbourne. The official survey focuses more on larger, state-owned firms.

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. While the government says the economy hit that mark in the first half of the year, signs since then show flagging growth, and economists said performance in the third quarter appears to have slipped.

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The Aussie’s gain was modest, however, as the PMI suggested economic conditions were still deteriorating despite a raft of government stimulus measures.

Chinese industry still contracting: manufacturing indices