Caixin China factory sector PMI drop sharply in September

Manufacturing sector activity in the People's Republic of China slowed to its weakest in a year last month according to the results of a key survey, amid a sharp decline in overseas demand and concerns over global trade spats.

Caixin's factory sector Purchasing Managers' Index slipped from 50.6 for the month of August to 50.0 in September, falling short of economists' forecasts for a reading of 50.5.

According to the survey compiler, new work was unchanged from the month before while new export business declined at its quickest pace since early 2016.

"At the same time, companies continued to reduce their headcounts, while subdued demand conditions led to more cautious approaches to inventories and buying activity," Caixin said in a statement.

"Looking ahead, firms expressed the weakest level of optimism towards the 12-month business outlook in 2018 so far. Concerns continued to mount about the ongoing global trade frictions as well as the near-term impact of strict environmental policies."

Output levels were said to have risen, but at their slowest clip in almost a year, alongside a further reduction in staffing levels, partly on the back of companies' restructuring. Indeed, job cuts picked-up to their quickest since February 2016.

Backlogs of work increased further, but by the least in a year.

To take note of, suppliers' delivery times continued to lengthen, Caixin said, with companies citing strict environmental policies and stock levels among vendors as contributing factors.

Stricter environmental policies were also referenced as one of the drivers behind increased average purchasing costs, together with the impact from supplier price hikes.

"However, efforts to boost competitiveness meant that selling prices rose only modestly."