(Yicai) Sept. 30 -- China’s manufacturing activity returned to expansion this month as production strengthened, while raw material prices increased sharply.

The manufacturing purchasing managers’ index (PMI) rose 0.3 percentage point from August to 50.1, according to data released by the National Bureau of Statistics today. A reading above 50 indicates expansion.

The rebound was modest, with stronger production helping lift factory activity back into expansion despite a slight dip in orders. Among the indicators tracked in the manufacturing PMI survey, the production index climbed 1.3 points to 51.7, while the new orders index edged down 0.1 point to 50.5 and the new export orders index slipped by the same amount to 50. Of the 21 industries tracked, 12 recorded PMIs above the expansion threshold, four more than in August.

Manufacturing supply and demand are likely to continue expanding in the fourth quarter, supported by government policies and the sector’s resilience, according to Wen Tao, an expert at the China Logistics Information Center. The manufacturing production and business activity expectations index remained unchanged from August at 53.8 in September.

The recovery in manufacturing demand was particularly evident in the consumer goods sector this month, Wen said. Stockpiling ahead of the Mid-Autumn Festival and National Day holidays, seasonal changes, and the completion of overseas orders pushed the sector’s new orders index up by more than 3 points to nearly 53, while its new export orders index gained more than 1 point to almost 52.

Raw Material Prices Surge

Price pressures increased sharply. The manufacturing purchase price index jumped 4.2 points from August to 60.8, while the ex-factory price index rose 3.6 points to 54. The gap suggests more manufacturers faced higher input costs than were able to raise their selling prices, adding pressure on profit margins.

Crude oil and natural gas prices climbed significantly amid international geopolitical developments, pushing the corresponding price indexes for the basic raw materials sector higher. The sector’s purchase price index rose by more than 10 points to above 70, while the ex-factory price index gained more than 10 points to over 60.

Higher raw material prices also lifted the purchase price indexes for the manufacturing of equipment, high-tech products, and consumer goods to above 54, increasing cost pressures on manufacturers.

In the non-manufacturing sector, which comprises construction and services, the headline business activity index rose 1.2 point from August to 50.2, returning above the 50-point expansion threshold. Within that index, the gauge for construction jumped 3.4 points to 50.3, while that for services gained 0.9 point to 50.2.

Wu Wei, another expert at the CLIC, predicted that demand for investment and consumption is expected to recover further in the fourth quarter as growth-stabilizing policies take effect and the traditional year-end peak season approaches, supporting stable non-manufacturing activity.

China’s composite PMI output index, which combines the manufacturing PMI’s production sub-index and the non-manufacturing PMI, rose to 50.7 in September from 49.5 in August, the data showed.


Editor: Emmi Laine