Manufacturing activity in China continued its rebound in September on improving production and demand, government data showed Saturday - a positive sign for the world's second-largest economy. The official purchasing managers' index (PMI) came in at 50.4 for September - exactly the same level as in August, which was its highest since October 2014 - figures from the National Bureau of Statistics (NBS) showed.
A figure above 50 signals expanding activity, while anything below demonstrates shrinkage. Investors closely watch the PMI readings, which gauge conditions at Chinese factories and mines, as the first indicator of the health of the economy each month. The September figure was up from July's 49.9 and compared to the median forecast of 50.5 in a Bloomberg News survey of economists. After August's unexpected surge, some experts had expected a deceleration.
But heavy rain and flooding in the south and centre of the country have fuelled a surge in demand as reconstruction work gets underway. The manufacturing sector has also been supported by a rise in the property market, with prices of new apartments up some 40 percent year-on-year in some cities and 25 percent in Beijing, which boosts demand for construction materials, furniture and appliances.
China's key manufacturing sector has been struggling in the face of sagging global demand for Chinese products and excess industrial capacity left over from the country's infrastructure boom. But Saturday's data add to evidence of improvement as government fiscal support and the soaring property market help underpin growth. Fresh signs of stability may lead policy makers to remain on hold after keeping their benchmark rate at a record low for almost a year.
"Thanks to heavy fiscal stimulus through (state owned enterprise) investments, production related to infrastructure projects and the enlarging current account surplus, GDP growth could edge up to 6.9 percent in Q3 and Q4, bringing the annual figure to 6.8 percent," Alicia Garcia Herrero, chief economist of Natixis Asia Limited in Hong Kong wrote in a recent report, according to Bloomberg news.
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