Fiscal support calls grow louder as China’s activity data sends ‘mixed messages’

China’s official manufacturing purchasing managers’ index beat expectations in September, but the reading from a private survey slipped into contraction

Reading Time:3 minutes

An employee works at a textile factory in Binzhou, in eastern China’s Shandong province. Photo: AFP

Published: 9:39am, 30 Sep 2024Updated: 5:30pm, 30 Sep 2024

Factory activity in China marginally improved in September, but remained in contraction for a fifth consecutive month, with analysts pointing to the need for fiscal support despite last week’s heavy dose of stimulus and a rallying call from top-level officials.

The official manufacturing purchasing managers’ index (PMI) – a survey of sentiment among factory owners – rose to a five-month-high of 49.8 in September, compared with August’s reading of 49.1, according to data released by the National Bureau of Statistics (NBS) on Monday.

It exceeded the expected reading of 49.5 predicted by economists polled by Bloomberg, with a reading above 50 typically indicating an expansion of economic activity, whereas a reading below implies a contraction.

The survey was conducted just at the time financial authorities rolled out a raft of stimulus measures at the start of last week and before President Xi Jinping issued a rallying call in an unexpected Politburo meeting.

“The stimulus package announced last week should help shore activity over the coming months,” said Gabriel Ng, assistant economist at Capital Economics.

“But supply-demand imbalances are likely to persist, keeping deflationary pressures strong. And there are downside risks to exports amid growing protectionist measures against China.