BEIJING, Oct. 1 (Reuters) – Factory activity in China expanded at a slower pace in September, a private sector survey showed on Sunday, with a slowdown in external demand weighing on expectations even as production increased.
The Caixin/S&P global manufacturing PMI fell to 50.6 in September from 51.0 the previous month, missing analysts’ expectations of 51.2. The 50-point mark separates growth from contraction.
The world’s second-largest economy is showing some signs of stabilization after a series of modest policy measures, but the outlook is clouded by a real estate slump, declining exports and high youth unemployment.
The survey comes a day after China released its official Purchasing Managers’ Index, which showed factory activity expanded for the first time in six months in September, adding to a string of indicators suggesting the economy has begun to decline.
According to the Caixin PMI, factory output and new orders remained in expansionary territory in September, however, external demand remained weak with the export orders index contracting for a third month.
“The economic recovery has not yet found a solid foundation, with insufficient domestic demand, external uncertainties, and pressures on the labor market,” said Wang Qi, chief economist at Caixin Insight Group.
Manufacturers’ confidence for next year is at its lowest level in 12 months. The survey showed that producers of consumer, investment and intermediate goods reduced the number of their employees.
Input costs rose at the fastest pace since January, driven by higher prices for chemicals, crude oil and industrial metals.
Chinese policymakers face the daunting task of reviving stalled economic growth, with analysts calling for more aggressive steps on top of the gradual support achieved in recent months.
“The implementation and effectiveness of economic stabilization policies should be the next focus,” Wang said. “More effort may be needed to increase employment and income opportunities.”
To support growth, the central bank in September reduced the amount of cash banks must hold in reserves.
“We do not expect significant fiscal or monetary stimulus by Chinese authorities in the coming months,” Standard & Poor’s Ratings said in a research note. “While subdued policy stimulus means more pain ahead for companies and banks, it also shows that China continues to move away from unproductive debt-fueled growth.”
A separate PMI released by Caixin/S&P Global on Sunday showed that services activity in China expanded at the slowest pace this year in September.
(Reporting by Liangping Zhao and Ryan Wu – Prepared by Muhammad for the Arabic Bulletin) Editing by Sam Holmes
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