China September factory activity seen growing slightly: Reuters poll

September 28, 2021

BEIJING (Reuters) – China’s factory activity likely grew only slightly in September, a Reuters poll showed on Tuesday, as high raw material prices and power cuts continued to pressure manufacturers in the world’s second largest economy.

The official manufacturing Purchasing Manager’s Index (PMI)is expected to stay at 50.1 in September, the same as the August reading, according to the median forecast of 34 economists polled by Reuters. A reading above 50 indicates expansion from the previous month.

China’s economy rapidly recovered from a pandemic-induced slump last year, but momentum has weakened in recent months, with the vast manufacturing sector facing heightened costs and production bottlenecks, and more recently, electricity rationing.

China is in the grip of a power crunch as a shortage of coal supplies, toughening emissions standards and strong demand from manufacturers and industry have pushed coal prices to record highs and triggered widespread curbs on usage.

“Unless the power issues are resolved and production restrictions are lifted, efforts by Beijing to ease policy will have a more muted impact on economic output. Thus, power shortages raise the possibility that any economic rebound will be delayed,” said analysts at BCA Research on Tuesday.

China is also dealing with ongoing small-scale coronavirus outbreaks in the southeast province of Fujian and the northeastern province of Heilongjiang.

Higher raw material prices, especially of metals andsemiconductors, have also pressured profits. Earnings at China’s industrial firms in August slowed for the sixth straight month.

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

The private Caixin manufacturing PMI will also be published on the same day. Analysts expect the headline reading will rise to 49.5 from 49.2 the month before, remaining in contraction.

(Reporting by Gabriel Crossley; Editing by Raju Gopalakrishnan)

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