China’s factory activity expanded in September, marking the first growth in six months, according to an official survey. The purchasing managers’ index (PMI) rose to 50.2 in September, up from 49.7 in August, surpassing the forecast of 50.0. This increase in factory output is in line with other indicators that suggest China’s economy is rebounding after a period of decline. Preliminary signs of improvement were seen in August, with increased factory output, retail sales growth, and narrowing declines in exports and imports. Profits at industrial firms also saw a surprising 17.2% increase in August, following a decline in July.
The non-manufacturing PMI, which measures service sector activity and construction, also saw a rise to 51.7 in September compared to August’s 51.0. The composite PMI, which incorporates both manufacturing and non-manufacturing activity, climbed to 52.0 in September from 51.3. These positive indicators suggest that the Chinese economy is gradually stabilizing and bottoming out after a period of slowdown. Policymakers will view these stable economic indicators positively as they continue to address the ongoing property sector debt crisis that has affected global markets. Despite measures taken to support the property market, such as cutting mortgage rates, the sector still faces challenges with falling home prices and declining property investment.
In light of the economic stabilization, analysts suggest that more policy support may be needed to ensure that China’s economy can achieve the government’s growth target of approximately 5% for this year. The property sector remains a key concern, and further fiscal policy changes may be required to provide additional support. However, it is believed that any changes in fiscal policy stance may occur next year rather than this year. Moving forward, economists will closely monitor consumer spending during the upcoming “Golden Week,” which is expected to be the most popular in history, to gain further insights into the state of China’s economy.
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