China announced on Wednesday that manufacturing activity expanded in September as the world’s second largest economy continued to show signs of recovery from the world Coronavirus Pandemic.
The official manufacturing purchasing managers’ index (PMI) for September compared to 51.5 51.0 in August, according to the National Bureau of Statistics.
Analysts polled by Reuters had expected the official PMI for the manufacturing sector to be 51.2 in September.
PMI values above 50 indicate expansion, while those below this value indicate contraction. The PMI values are sequential and indicate a monthly expansion or contraction.
The official services PMI was 55.9 in September, down from 55.2 in August.
China’s manufacturing sector was hit earlier this year when factories closed due to large-scale lockdowns to contain the coronavirus pandemic.
The strong September data was due to the simultaneous rebound in supply and demand. wrote Zhao Qinghe, a senior statistician at the National Bureau of Statistics.
The weeklong Golden Week holidays, which begin Thursday through October 8, could have helped as factories accelerated production before the break, Ting Lu, chief economist for China at Nomura, said before the data release.
The long vacation has also spurred consumer demand, Zhao added, according to a CNBC translation in the statistics bureau.
In particular, production and orders for food, alcohol, beverages and tea grew faster in September compared to August, Zhao added.
Private survey shows expansion of factory activity
Separately, a private manufacturing survey found manufacturing activity increased in September and the Caixin / Markit PMI was 53.0.
Analysts polled by Reuters expect Caixin / Markit PMI to hit 53.1 for September – the same level as August.
The private survey shows a greater mix of small and medium-sized businesses. In comparison, the official PMI survey typically surveys a large proportion of large corporations and state-owned companies.
The Caixin / IHS sub-index for total orders rose to its highest level since January 2011, and the indicator for new export orders rose to its highest level in three years.
“The strong demand allowed production to recover, with the production sub-index remaining high.” wrote Wang Zhe, Senior Economist at Caixin Insight Group. “Companies surveyed said that the effects of the epidemic were wearing off and orders were growing rapidly,” added Wang.
While the strength of manufacturing will ease the burden on policymakers, the job market in China remains “worrying,” he said.
“Employment improvement depends on longer term economic recovery and a more stable external environment. In the near future, great uncertainties remain about the overseas pandemic and the US presidential election,” Wang wrote.