Manufacturing in China unexpectedly decreases, services offer support

Employees work on the production line of US baby products and toys maker Kids II Inc. at a factory in Jiujiang, Jiangxi province, China on June 22, 2021. REUTERS / Gabriel Crossley

  • September official manufacturing PMI at 49.6 vs. 50.1 in August
  • September official services PMI at 53.2 against 47.5 in August
  • Official composite PMI for September at 51.7 vs. 48.9 in August

BEIJING, Sept.30 (Reuters) – Chinese factory activity unexpectedly contracted in September amid tighter restrictions on electricity use and high input prices, as services resumed their expansion as COVID-19 epidemics receded, offering some relief to the world’s second-largest economy.

The official manufacturing purchasing managers index (PMI) was 49.6 in September from 50.1 in August, data from the National Bureau of Statistics (NBS) showed on Thursday, sliding into contraction for the first time since February. 2020.

Analysts in a Reuters poll expected the index to remain stable at 50.1, unchanged from the previous month. The 50 point mark separates growth from contraction.

China’s economy quickly recovered from a pandemic-induced slump last year, but momentum has weakened in recent months as its sprawling manufacturing sector is hit by rising costs, bottlenecks restriction of production and rationing of electricity.

The increase in COVID-19 cases in dozens of cities over the summer has also disrupted the manufacturing and service sectors, although the latter is starting to rebound as epidemics recede.

A sub-index of manufacturing output contracted in September for the first time since February last year, dragged down by a decline in energy-intensive industries, such as metal processing plants and petroleum products. The gauge stood at 49.6 against 50.1 a month earlier.

“In September, due to factors such as low volumes of activity in energy-intensive industries, the manufacturing PMI fell below the critical point,” Zhao Qinghe, senior statistician of NBS, said in a statement. communicated.

“The two indices of energy-intensive industries … are both below 45.0, indicating a significant drop in supply and demand.”


The sudden contraction in factory activity will put more pressure on an economy already hit by the brakes in its real estate and technology sectors and facing numerous downgrades to growth by private sector economists.

Other Asian economies are also struggling with production issues due to supply chain disruptions, with data on Thursday showing Japan’s industrial production plummeting for a second straight month in August.

“(Chinese) economic growth in the fourth quarter is likely to slow further without any change in government policies, and the pace of the slowdown may accelerate,” Zhiwei Zhang, chief economist at Shenzhen-based Pinpoint Asset Management, said after the publication. PMI data.

“The big question is whether the government’s monetary and fiscal policies will become more favorable now or whether the government will wait until the end of the year to change policies.”

The central bank last eased its requirements on the amount of liquidity banks should hold in mid-July, just ahead of an increase in domestic cases of COVID-19.

The People’s Bank of China (PBOC) left its key rate for loans to businesses and households unchanged for the 17th month of September.


A coal shortage, stricter emissions standards, and strong demand from manufacturers and industry have pushed coal prices to record highs and triggered widespread restrictions on electricity use in at least 20 provinces and regions.

Rising commodity prices, especially metals and semiconductors, also weighed on manufacturers’ profits. Chinese industrial company profits in August slowed for the sixth consecutive month.

A commodity costs sub-index fell to 63.5 in September from 61.3 a month earlier, while a new orders indicator stood at 49.3 from 49.6 in August, declining for the second consecutive month.

An employment sub-index continued to contract, to 47.8 from 47.0 a month earlier.

A separate private survey also released on Thursday, which focuses on small businesses and export-oriented firms, showed factory activity in September neither increased nor decreased.

On a more optimistic note, the official non-manufacturing PMI in September was 53.2, rebounding from 47.5 in August, according to NBS data, as COVID-19 outbreaks receded after rising for months summer.

COVID-19-related restrictions last month caused a sharp contraction in service sector activity for the first time since the pandemic peaked last year.

September’s official composite PMI index, which includes both manufacturing and services activity, stood at 51.7 from 48.9 in August.

Reporting by Ryan Woo and Gabriel Crossley; Editing by Tom Hogue and Ana Nicolaci da Costa

Our standards: Thomson Reuters Trust Principles.

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