BEIJING (Reuters) – China’s factory activity in September shrank for a fifth straight month while the services sector slowed sharply, suggesting even more stimulus is needed to hit Beijing’s 2024 growth target with only three months left in the year.
The National Bureau of Statistics (NBS) purchasing managers’ index (PMI) released on Monday nudged up to 49.8 in September from 49.1 in August, still below the 50-mark separating growth from contraction but beating a median forecast of 49.5 in a Reuters poll. The reading was the highest in five months.
Together with a downbeat private-sector Caixin survey also released on Monday, the data showed China’s sprawling manufacturing industry remains a pain point for policymakers who acknowledged the economy faces “new problems” and have called for more forceful stimulus.
The central bank and top financial regulator on Sunday night unveiled more sweeping measures, including asking banks to lower mortgage rates for existing home loans before Oct. 31.
Authorities last week also launched the country’s most aggressive stimulus package since the COVID-19 pandemic.
SERVICES ACTIVITY COOLS
The September reading of the non-manufacturing PMI, which includes services and construction, dropped to 50.0 from 50.3 in August, marking the lowest in 21 months.
The services PMI fell to 49.9, the first contraction since December last year, although the construction PMI shot up to 50.7 from 50.6 in the prior month.
Reuters reported on Thursday that 1 trillion yuan ($142.56 billion) due to be raised via special bonds will be used to increase subsidies for a consumer goods replacement programme and for business equipment upgrades.
China also aims to raise another 1 trillion yuan via a separate special debt issuance to help local governments tackle their debt problems, Reuters reported.
Officials said last week the programme has already boosted auto sales, home appliances and home decoration products.
Caixin services PMI showed on Monday activity in the sector slowed.
As a property downturn weighs on the broader economic recovery, top leaders at a Politburo meeting last week called for efforts to stop the falls in the housing market.
Megacities Shanghai and Shenzhen planned to lift key home purchase restrictions in coming weeks, joining a long list of smaller cities that have done so, Reuters reported on Friday.
Analysts expect the stimulus and a new fiscal package with a size around 2 trillion yuan should be enough to deliver growth in line with the “around 5%” target, but the country still needs to tackle issues of weak demand and an increasingly hostile global trade environment.
($1 = 7.0146 Chinese yuan)
(Reporting by Ellen Zhang and Ryan Woo; Editing by Sam Holmes)