BEIJING (Reuters) – China’s manufacturing activity shrank sharply in September as new orders at home and abroad cooled, pulling down factory owners’ confidence to near record lows, a private-sector survey showed on Monday.
The Caixin/S&P Global manufacturing PMI fell to 49.3 in September from 50.4 the previous month, missing analysts’ forecasts in a Reuters poll of 50.5. The reading marked the lowest since July last year.
Chinese authorities unveiled aggressive stimulus last week, lowering interest rates and injecting liquidity into the banking system, as Beijing sought to pull economic growth back towards this year’s target of roughly 5%.
In an unusual September Politburo meeting focused on macroeconomic issues last week, China’s top leaders acknowledged the economy was facing “new problems” and called for fresh policies to more “forcefully” stimulate growth.
Even though production expanded for the 11th straight month in September, new orders fell significantly from August’s gain. The sub-index of new orders was the lowest in two years.
While exports have been a bright spot for the economy, new orders from abroad declined at the fastest pace since August last year. Chinese manufacturers said that a deterioration in foreign demand led to the fall in export orders.
The United States has implemented steep tariff hikes on Chinese products, including electric vehicles (EVs) and the European Union is expected to make a final decision on potential EV tariffs soon.
Overall confidence was affected by concerns over the global trade outlook. Manufacturers’ optimism slipped to the second lowest level since data collection began in April 2012. Confidence hit rock bottom in June 2019 during the Sino-U.S. trade of the Trump administration.
The slowdown in demand led to a fall in average input prices, further contributing to reduced charges in September. Export charges also eased as competition intensified.
Firms also lowered headcount amid reduced workload and cost concerns. The rate of job shedding was the fastest in five months.
The Caixin survey is believed to cover smaller, export-oriented firms.
