BEIJING (Reuters) – Activity in China’s factories extended solid growth in September as payrolls expanded for the first time this year and overseas demand surged, a private survey showed on Monday, adding further momentum to an economy recovering from the coronavirus crisis.
The Caixin/Markit Manufacturing Purchasing Managers’ Index(PMI) barely budged from the previous month, down fractionally to 53.0 from August’s 53.1, with the gauge staying above the 50-level that separates growth from contraction for the fifth consecutive month.
Analysts polled by Reuters had forecast the headline index to remain steady at 53.1.
China’s vast industrial sector is steadily returning to the levels seen before the pandemic paralysed the economy early this year. Pent-up demand, stimulus-driven infrastructure and surprisingly resilient exports have been the main drivers propelling the rebound.
“The recovery in manufacturing has maintained its momentum in the wake of the Covid-19 epidemic, with both the supply and demand surging,” Wang Zhe, senior economist at Caixin Insight Group, wrote in a note accompanying the Caixin survey release.
“The sharp rise in overseas demand has complemented the domestic market,” Wang said.
The Caixin survey showed total new orders recorded the strongest increase in September since January 2011, and the gauge for new export orders- which were hit hard by the global outbreak of the coronavirus – rose at the fastest pace in over three years.
Factory output softened slightly from August but remained strong, while input prices grew faster than prices charged, putting pressure on profit margins.
The Caixin survey focuses more on small and export-oriented firms while the official survey, also released earlier on Wednesday, largely tracks large companies and state-owned enterprises.
The private survey also showed Chinese factories expanded payrolls for the first time in ten months, although only slightly.
“However the job market remains worrisome, as the improvement in employment relies on a longer-term economic recovery and a more stable external environment. In the near future, great uncertainties remain about the overseas pandemic and the U.S. presidential election,” said Wang.
China observers also worry about the intensifying Sino-U.S. tensions as a rift between the two economic superpowers deepens over a broad range of issues.
In a note to clients, analysts at Oxford Economics cautioned that the last few months of the year will probably see receding momentum in many countries as rising cases of Covid-19 prompt a re-tightening of social distancing measures.
Analysts expect China’s GDP to grow 2-3% in 2020, the weakest since 1976.
(Reporting by Gabriel Crossley; Editing by Shri Navaratnam)
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