Operating conditions in China stagnate in September
Staff Writer |
Chinese manufacturers signalled stagnant operating conditions at the end of the third quarter, following improvements in the prior 15 months.
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Production growth eased to a marginal pace, while total new work was broadly unchanged from the previous month.
New export business fell at the quickest rate since early 2016.
At the same time, companies continued to reduce their headcounts, while subdued demand conditions led to more cautious approaches to inventories and buying activity.
Looking ahead, firms expressed the weakest level of optimism towards the 12-month business outlook in 2018 so far.
Concerns continued to mount about the ongoing global trade frictions as well as the near-term impact of strict environmental policies.
The headline seasonally adjusted Purchasing Managers’ Index™ (PMI™) – a composite indicator designed to provide a single-figure snapshot of operating conditions in the manufacturing economy – fell from 50.6 in August to the neutral level of 50.0 in September.
This signalled no change in the health of China’s manufacturing sector following improvements in each of the prior 15 months.
Although Chinese manufacturing output continued to rise in September, the latest expansion was only marginal and the weakest recorded for nearly a year.
The slowdown in growth of production coincided with a broad stagnation in total new work received by goods producers.
According to panellists, subdued market demand and reduced export sales had weighed on overall new business.
Moreover, new export orders declined at the quickest rate since February 2016 amid a number of reports that the China-US trade war and subsequent tariffs had impacted foreign sales.
Companies reported a further fall in staff numbers, partly due to company restructuring plans and the non-replacement of voluntary leavers.
Notably, the rate of job cuts was the quickest for 14 months.
Concurrently, backlogs of work rose further, albeit at the weakest pace for a year.
Purchasing activity was left unchanged in September, which contrasted with greater input buying in the previous 15 months.
Muted demand conditions meanwhile led firms to become more cautious towards their inventory holdings, with stocks of inputs rising only fractionally while inventories of finished goods fell for the fifth month in a row.
Suppliers’ delivery times continued to lengthen amid reports of strict environmental policies and low stock levels among vendors.
That said, the rate at which supplier performance deteriorated was the weakest for 16 months.
Average purchasing costs rose solidly in September, and was generally linked to supplier price hikes for raw materials and the impact of stricter environmental policies.
However, efforts to boost competitiveness meant that selling prices rose only modestly. ■