China September factory activity steadies but economic outlook still weak

Wed Oct 1, 2014 12:43am EDT
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By Koh Gui Qing

BEIJING (Reuters) - Growth in China's manufacturing sector held up in September but remained subdued in a sign that the world's second-largest economy is still struggling to recover its growth momentum.

The official Purchasing Managers' Index (PMI) hovered at 51.1, the National Bureau of Statistics said on Wednesday, indicating a modest expansion in activity and a touch ahead of forecasts for a 51.0 reading.

The data came a day after China cut mortgage rates for the first time since the 2008 global financial crisis to boost its flagging economy, and reinforced a view among some analysts that sluggish domestic demand and a cooling property market were dragging on activity. [ID:nL3N0RV3IG]

"We see the risk of third-quarter gross domestic product growth slowing to 7 percent" from 7.5 percent in the second quarter, economists at ANZ Bank said in a note to clients, noting that growth in China's crude steel output fell to the year's low in the first 20 days of September.

"Weakness in the property market and rising credit risks in the commodity sector will continue to weigh on the economy," the ANZ economists said.

Unsteady - albeit strengthening - export sales, softening domestic investment and the property slowdown have all dragged China's economy through a rough year, leading investors to bet on further policy loosening by authorities to lift growth.

Wednesday's PMI survey, which is biased towards large, state-owned factories, showed that demand for goods produced by such manufacturers was stronger in China than abroad, even though the trend is softening.

The new orders sub-index, a proxy for foreign and domestic demand, stood at 52.2, down slightly from 52.5 in August but well above the 50-point mark that demarcates growth from contraction on a monthly basis.   Continued...

A worker places ginseng on a shelf at a ginseng processing factory in Baishan, Jilin province, September 22, 2014. REUTERS/Stringer