China’s factory activity likely grew at slightly faster pace in September

FILE PHOTO: Workers are seen on a production line manufacturing masks at a factory in Shanghai, China January 31, 2020. REUTERS/Aly Song

(Reuters) – China’s factory activity likely expanded at a slightly faster pace in September, a Reuters poll showed on Monday, as the economy extends a steady recovery from the coronavirus crisis.

The official manufacturing Purchasing Manager’s Index (PMI) is expected to pick up moderately to 51.2 in September from August’s 51, according to the median forecast of 28 economists polled by Reuters. A reading above 50 indicates an expansion in activity on a monthly basis.

China’s vast industrial sector is steadily returning to the levels seen before the pandemic paralysed huge swathes of the economy early this year.

Pent-up demand, stimulus-driven infrastructure and surprisingly resilient exports have been the main drivers propelling the rebound. Consumption is also slowly recovering, despite signs of lagging spending among low-income groups.

Profits at China’s industrial firms extended their robust growth for the fourth month in August, official data showed on Sunday.

Moreover, China’s auto market rebounded smartly from the COVID-19 crash in recent months, executives said at a rare in-person trade show on Saturday.

However, the path ahead may not be smooth sailing, some analysts caution.

China’s manufacturing PMI indices may start to level off in September on softening industrial metals prices and with a survey by Standard Chartered showing new orders and output weakening for smaller companies, said Julian Evans-Pritchard, senior China Economist at Capital Economics, in a note.

“The initial boost to activity from lifting COVID-19 restrictions has run its course…Any further acceleration will therefore need to rely entirely on stronger demand,” he said.

The economy, which grew 3.2% in the second quarter year-on-year, is set to expand 2.2% this year – the weakest in over three decades.

The official PMI, which largely focuses on big and state-owned firms, and its sister survey on the services sector, will both be released on Sept. 30.

The private Caixin manufacturing PMI will also be published on Sept. 30. Analysts polled by Reuters expect a reading of 53.1, the same as in August. The Caixin services PMI survey will be out on Oct. 9.