China’s Factory Activity Moderates, Private Survey Shows

Workers stand in front of machines on a yarn production line at the Fujian Strait Textile Technology Co. factory in Putian, Fujian province, China, on Monday, Feb. 8, 2021. China may have got its control of Covid down to a handful of new cases per day, but the restrictions, quarantines and travel curbs to keep it that way have forced millions of factory workers to give up the idea of a traditional family gathering. Photographer: Qilai Shen/Bloomberg

(Bloomberg) -- A private gauge of China's manufacturing activity slowed its pace of expansion in September, suggesting there's still room for caution as the nation charts its economic trajectory for the rest of the year.

The Caixin manufacturing purchasing managers' index was 50.6 last month, Caixin and S&P Global said in a statement Sunday — dipping closer to the 50 line, below which indicates contraction from the month before. That was below economists' expectations.

Caixin's services index was 50.2 for the month, also still in expansion but suggesting that pace of growth in activity is losing momentum. The figures show a somewhat precarious recovery even as the nation has rolled out stimulus.

“The manufacturing sector continued a slow recovery,” Wang Zhe, senior economist at Caixin Insight Group, said in a statement accompanying the survey. “Various important economic indicators have shown marginal improvement, and the macroeconomy has shown signs of stabilization. However, the economic recovery has yet to find a solid footing.”

Earlier data had shown some improvement, with the official manufacturing PMI rising to 50.2 this month — the first expansion since March, though still just barely above the 50 line. A gauge of non-manufacturing activity — which captures the services and construction sectors — improved more than expected, however.

“The Caixin setback suggests private businesses and exporters are still under heavy pressure,” said Eric Zhu, a Bloomberg economist. “Businesses — particularly in the private sector — remain cautious on hiring.”

China's economy has been challenged this year by a property crisis and weak consumer and business confidence, prompting Beijing to roll out some supportive measures. Authorities have boosted local government borrowing for infrastructure and loosened monetary policy.

Recent key data has suggested a bottoming out in some areas, though obstacles to growth remain. Economists cut their forecasts for gross domestic product expansion in a Bloomberg survey last month, projecting that the country may just about meet its growth target of around 5% for the year as real estate remains a drag.

President Xi Jinping on Thursday vowed to step up efforts to meet the country's economic targets at a speech marking the 74th anniversary of the founding of the People's Republic of China.

--With assistance from Denise Wee.

(Updates with chart and analyst comment)

More stories like this are available on bloomberg.com