China’s manufacturing Purchasing Managers’ Index (PMI) rose to 50.1 in September, ending two consecutive months of contraction and returning to expansion territory. However, while the production index increased to 51.7, new orders fell to 50.5, and new export orders dropped to 50.0. Data on domestic consumption, investment, and other internal demand indicators remain weak, indicating that the improvement in the manufacturing sector has not yet been widely transmitted.
The National Bureau of Statistics of China announced on September 30th that the country’s manufacturing PMI for September was 50.1, up 0.3 percentage points from August’s 49.8. The production index rose from 50.4 in August to 51.7, but the new order index decreased from 50.6 to 50.5, and the new export order index dropped from 50.1 to 50.0. The employment index also decreased from 48.7 to 48.4, still in contraction territory.
Zhang Liqun, a contracted analyst at the China Logistics and Purchasing Federation, told “First Financial” that although the September PMI slightly rebounded, order-related indices continued to decline, especially with small businesses’ order-related indices below the boom-bust line. He believes there is a need to significantly increase government investment, effectively expand demand, increase business orders, drive business production and investment, and stimulate employment and consumer spending.
Reuters analysis suggests that the rebound in manufacturing activity in September is related to the fading of production disruptions caused by heavy rain and typhoons in August and the support of industrial demand driven by the global artificial intelligence trend. However, weak domestic demand and a sluggish real estate market continue to impact household and business confidence.
A recent analysis by the Dutch international group (ING) pointed out that while China’s manufacturing sector performance is relatively strong, external demand remains a critical support, while consumption and investment are relatively weak.
Apart from manufacturing, data on consumption and investment remain weak. According to the National Bureau of Statistics of China, in August, the total retail sales of consumer goods increased by 0.4% year-on-year, with a cumulative growth of 1.1% from January to August; fixed asset investment in the same period decreased by 7.2% year-on-year, with real estate development investment dropping by 19.9%.
When analyzing the economic data for August, the Financial Times pointed out that China’s industrial production is supported by exports, but the weak real estate market continues to suppress domestic demand and consumer confidence, leading to differentiation between industrial production, consumption, and investment.
While the manufacturing PMI returned above 50 in September, the PMI for medium and small enterprises remained at 49.7 and 48.9, respectively, indicating contraction. From the gap between production and orders to data on consumption, investment, real estate, and employment, the improvement in manufacturing activity has not yet synchronized across other economic sectors.