China Sep. Caixin Mfg PMI Softens On Weak New Orders, Output

     BEIJING (MNI) - Operating conditions in China's manufacturing sector

softened in September, dragged down by the weakest rise in new business in three

months and an easing in output to the lowest level since June, according to the

latest Caixin Manufacturing Purchasing Managers' Index (PMI) released Saturday.

     The headline manufacturing PMI fell to 51.0 in September from 51.6 in

August but remained above the 50 break-even mark for fourth consecutive month,

according to data compiled by IHS Markit for Caixin. 

     Readings above 50 indicate expansion in the manufacturing sector while

readings below 50 indicate contraction. The higher the PMI reading above 50, the

faster the expansion in the sector. The lower the reading below 50, the faster

the contraction.

     The slowdown in the Caixin index -- which focuses on smaller and

medium-size companies -- was in contrast to the sharp rise in the official

manufacturing PMI jointly released today by the China Federation of Logistics

and Purchasing and the National Bureau of Statistics. The CFLP/NBS PMI came in

above expectations at 52.4 in September, the  highest level since April 2012,

due mainly to robust input and output prices.

     The Caixin index showed that new business expanded at a slower pace due to

the weak demand. "Notably, new export work increased only marginally during the

latest survey period," Caixin said. 

     As a result, survey participants said they reduced their buying activity

during September. Although input demand moderated slightly, the average time

taken for input delivery lengthened in September to the largest since January,

with input providers delaying delivery times due in part to stricter

environmental policies and stock shortages of vendors, Caixin noted.

     Companies continued to take a relatively cautious approach to employment,

with staff numbers falling in September amid reports of companies down-sizing.

     "Lower staffing levels and a further upturn in new work placed put further

pressure on operating capacity, as shown by a sustained increase in backlogs of

work. However, the rate of accumulation eased to its weakest for five months,"

Caixin noted. 

     Inventories of raw materials declined in September for the first time since

June, although at a modest pace. Finished goods inventories also fell for the

fourth consecutive month. 

     Inflationary pressures ticked up, with both input prices and output prices

rising at faster rates, Caixin warned, adding input costs increased at the

fastest pace in nine months. 

     Manufacturers complained about higher raw material prices, so companies

raised output prices. 

     "Manufacturers remained optimistic that output would increase over the next

year, though the degree of optimism weakened slightly since August," Caixin

said. 

     "The manufacturing sector continued to expand in September, although at a

slightly weaker rate. The Chinese economy was stable in the third quarter," said

Zhong Zhengsheng, director of Macroeconomic Analysis at CEBM Group, a research

subsidiary of Caixin, "But the outstanding price pressure from upstream

industries will be a drag on the continued improvement of companies'

profitability." Zhong warned. 

     The Caixin Manufacturing PMI is based on data compiled from monthly replies

to questionnaires sent to purchasing executives at more than 500 manufacturing

companies.

--MNI Beijing Bureau; +86 (10) 8532 5998; email: marissa.wang@marketnews.com

--MNI BEIJING Bureau; +1 202-371-2121; email: john.carter@mni-news.com

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