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Manufacturing expands at softer pace in China

Staff Writer | October 2, 2017
Manufacturing operating conditions in China continued to improve at the end of the third quarter, albeit only marginally.
Manufacturing China
Asia   Caixin China General Manufacturing PMI
Production and new orders both expanded at softer rates, with firms also signalling slower growth in export sales.

As a result, purchasing activity increased at a weaker pace while staffing levels continued on a downward trend.

Environmental inspection policies meanwhile weighed on supplier performance, with delivery times lengthening to the greatest extent since January.

At the same time, inflationary pressures picked up, with average input costs and output prices both rising sharply.

The seasonally adjusted Purchasing Managers’ Index™ (PMI™) – a composite indicator designed to provide a single-figure snapshot of operating conditions in the manufacturing economy – a composite indicator designed to provide a single-figure snapshot of operating conditions in the manufacturing economy – fell from 51.6 in August to 51.0 in September, but remained above the crucial no-change 50.0 mark for the fourth month in a row.

That said, the index was consistent with only a marginal improvement in the health of China’s manufacturing sector.

The decline in the headline index coincided with a weaker expansion in total new business during September.

Furthermore, latest data pointed to the slowest increase in new orders for three months.

While some panellists commented that improved market conditions had helped to lift sales, other firms mentioned that subdued client demand had weighed on growth.

Notably, new export work increased only marginally during the latest survey period.

In line with the trend for new orders, growth in output was the least marked since June and moderate overall.

Purchasing activity also increased at a weaker pace at the end of the third quarter.

Despite demand for inputs moderating slightly, the average time taken for purchased items to be delivered to manufacturers continued to lengthen in September.

Moreover, vendor performance deteriorated at the quickest rate since the start of the year.

A number of respondents linked longer lead times to environmental inspection policies and stock shortages.

Chinese manufacturing employment declined again in September amid reports of company down-sizing policies.

That said, the rate of job shedding weakened to a marginal pace.

Lower staffing levels and a further upturn in new work placed further pressure on operating capacity, as shown by a sustained increase in backlogs of work.

However, the rate of accumulation eased to its weakest for five months.

On the inventories front, stocks of purchases declined for the first time since June, albeit at a modest pace.

The amount of finished goods held by manufacturers also declined modestly during September.

Latest data signalled a sharp and accelerated rise in average cost burdens.

Furthermore, the rate of inflation was the steepest seen for nine months, with a number of panellists linking inflation to greater raw material costs.

As a result, factory gate charges rose at a faster pace.

Manufacturers remained optimistic that output would increase over the next year, though the degree of optimism weakened slightly since August.