BEIJING (Reuters) – China’s factory activity performed better-than-expected in September, stabilizing after a slump in August, a company poll on Thursday showed, with a smaller decline in production counteracting an increase in demand.
The Caixin / Markit Manufacturing Purchasing Managers’ Index (PMI) rose to 50.0 in September from 49.2 in the previous month, compared to analyst expectations of 49.5 in a Reuters poll. The 50 mark separates growth from contraction every month.
The Chinese economy recovered quickly from a pandemic-induced slump last year, but has since lost momentum as its sprawling manufacturing sector has been hit by COVID-19 outbreaks, higher costs, production bottlenecks and, more recently, electricity rationing.
China is experiencing a power shortage due to coal shortages, stricter emissions standards, and strong industrial demand, leading to widespread restrictions on power consumption.
The production sub-index showed that production fell for the second month in a row, but more slowly.
“The epidemic flare-up in multiple regions and raw material shortages slowed production at manufacturing companies,” said Wang Zhe, chief economist at Caixin Insight Group, in comments released with the data.
China has also addressed ongoing small coronavirus outbreaks in southeastern Fujian Province and Heilongjiang Province in the northeastern part of the country.
“Companies surveyed said the rise in costs was mainly driven by a sharp rise in the price of energy, industrial metals and electronic raw materials,” said Wang.
The data showed that new export orders slid into decline more quickly, reaching their lowest level since February as foreign demand cooled. The factories continued to lay off workers and at a faster pace.
“Demand for consumer goods has been weak, reflecting the lack of purchasing power among consumers,” said Wang, adding that demand for intermediate goods is higher.
A sub-index for incoming orders returned to expansion. Input prices rose the fastest since May.
Higher raw material prices, particularly metals and semiconductors, have also put pressure on profits. Industrial company profits weakened for a sixth month in August.
Reporting by Gabriel Crossley; Edited by Ryan Woo and Ana Nicolaci da Costa