Chinese factory activity in September set for third straight monthly contraction: Reuters poll

BEIJING (Reuters) – Chinese factory activity is expected to have fallen for a third consecutive month in September, a Reuters poll showed on Thursday, as strict COVID measures in major cities and weakening export growth hit orders and business confidence.

The official purchasing managers’ index (PMI) for the manufacturing sector was forecast at 49.6 for this month, slightly higher than 49.4 in August, according to median forecasts from 26 economists polled by Reuters.

The 50 point mark separates contraction from growth.

China’s economy showed some improvements in August with faster-than-expected growth in factory output and retail sales, but prolonged COVID-related restrictions, slowing export momentum and a continued slowdown in a struggling real estate sector have clouded the outlook.

On Tuesday, data showed that profits for Chinese industrial companies fell at a faster pace in January-August.

Chengdu, a megacity of 21 million people in southwestern Sichuan province, was shut down on September 1 after COVID cases were detected, becoming the largest Chinese metropolis to be hit with restrictions since the Shanghai lockdown. in April and May.

Shenzhen, southern China’s tech hub with a population of 18 million, also adopted multi-level anti-virus measures in early September.

“This could contribute to lower orders, employment and business confidence,” Min Joo Kang, an economist at ING, said in a note, referring to recent new COVID restrictions.

Many economists see China’s zero-COVID policy as a major constraint to growth.

As steel demand and production strengthened in the first three weeks of September from August, analysts at Goldman Sachs pointed to a soft underbelly as export growth appeared to have deteriorated further.

“Container throughput data for the first 10 days of September was down 15% year-on-year, in part due to port disruptions from typhoons, which could dampen growth in manufacturing activity. “, they said.

Goldman Sachs lowered its 2023 Chinese GDP growth forecast to 4.5% from a previous projection of 5.3%, and predicted that Beijing is unlikely to start reopening before the second quarter of next year.

The official manufacturing PMI, which largely focuses on large corporations and public companies, and its survey for the services sector, will be released on Friday.

The Caixin manufacturing PMI for the private sector, which focuses more on small businesses and coastal regions, will also be released on Friday. Analysts expect a headline of 49.5 for that, the same as August.

($1 = 7.2235 Chinese yuan renminbi)

(Polling by Anant Chandak; Reporting by Ellen Zhang and Ryan Woo; Editing by Shri Navaratnam)

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