Chinese manufacturing sector remains in contraction territory in September, PMIs show

China’s manufacturing sector remained in contraction territory in September, data released on Thursday showed.

According to government data, factory output improved slightly, edging up to 49.8 from August’s three-year low of 49.7 but below the 50 threshold that indicates expansion for the second consecutive month.

However, the figure was marginally above the 49.7 reading analysts had expected.

The sub-index tracking new orders rose from 49.7 to 50.2, while output grew from 51.7 to 52.3, although the gauge of new exports edged lower from 47.9 to 47.7.

Meanwhile, a separate survey conducted by Caixin/Markit revealed the purchasing managers’ index fell to a six-and-a-half year low, slipping from August’s reading of 47.3 to 47.2, although the figure was marginally better than the 47 flash estimate published last month.

In its report Markit said total new work fell at the quickest rate in over three years, largely because of a sharp decline in new export businesses, which led companies to cut production at the fastest rate in six-and-a-half years.

Meanwhile, staff numbers declined at the quickest rate since the start of 2009.

“The improvement in the official PMI contrasts with continued weakness in Caixin’s index,” said Julian Evans-Pritchard, China economist at Capital Economics.

“We suspect that this is because activity among the large state-owned firms that are more heavily represented in the official index will have been boosted most by the recent pick-up in fiscal spending and infrastructure investment.”

Evans-Pritchard added the official PMI indicated more monetary and fiscal stimulus, such as additional rate cuts, could be on the cards.

“We expect sentiment to begin to improve gradually over the coming months as the stock market stabilises and recent policy support measures continue to feed through into stronger economic activity,” he said.