China factory activity shrinks for second month

Readings below 50 indicate contraction.

Activity across China’s manufacturing sector contracted for the second straight month in September, adding to concerns about the slowing economy as the government rolled out more measures to boost property and auto sales.

The government’s official purchasing managers’ index hit 49.8 in September, according to the National Bureau of Statistics, up slightly from 49.7 the previous month. “Tepid demand is a main factor behind the oversupply of manufacturing and why it has not recovered”, said He.MSCI’s broadest index of Asia-Pacific shares outside Japan .miapj0000pus rose 0.5 percent. The PMI has been below 50 for eight of the past 25 months.

The PMI was at 39.44 in September, down from 47.67 in August.

The overall new orders sub-index, a proxy for domestic and external demand, saw its sharpest contraction since August 2012.

A summer stock market crash and China’s surprise currency devaluation in August have raised fears of shocks to the economy which could see it slowing more sharply than earlier expected, jeopardising the fragile global recovery.

The health of the labour market could be key in determining how much more stimulus authorities will deploy in coming months.

Companies in the services sector, however, continued to hire.

In the six-month outlook on business conditions, there was no change in positive expectations compared with August in terms of market conditions.

Tens of millions of Chinese were thrown out of work during the last global crisis, alarming the stability-obsessed Communist Party.

The non-manufacturing PMI reading for September was unchanged at 53.4, reflecting the relatively stronger performance of services industries throughout the economic slowdown.

The official data also comes ahead of the private manufacturing survey, which looks at smaller to mid-size businesses in the sector.