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China's manufacturing exercise expanded in September earlier than the Golden Week vacation

China announced on Wednesday that manufacturing activity expanded in September as the world's second largest economy continued to show signs of recovery from the coronavirus pandemic.

The official manufacturing purchasing managers' index (PMI) for September was 51.5, up from 51.0 in August, according to the National Bureau of Statistics.

Analysts polled by Reuters had expected the official manufacturing PMI to be 51.2 in September.

PMI values ​​above 50 indicate expansion, while those below this value indicate contraction. The PMI values ​​are sequential and indicate a monthly expansion or contraction.

The official services PMI was 55.9 in September, down from 55.2 in August.

China's manufacturing sector was hit earlier this year when factories closed due to large-scale lockdowns to contain the coronavirus pandemic.

Economic data from China, however, indicate robust exports and an expansion of the infrastructure triggered by impulses.

The strong September data was due to the simultaneous rebound in supply and demand, wrote Zhao Qinghe, a senior statistician with the National Bureau of Statistics.

The weeklong Golden Week holidays, which begin Thursday through October 8, could have helped as factories accelerated production before the break, Ting Lu, chief economist for China at Nomura, said before the data release.

The long vacation has also spurred consumer demand, Zhao added, according to a CNBC translation in the statistics bureau.

In particular, production and orders for food, liquor, beverages and tea grew faster in September compared to August, Zhao added.

Private survey shows expansion of factory activity

Separately, a private manufacturing survey found manufacturing activity increased in September and the Caixin / Markit PMI was 53.0.

Analysts polled by Reuters expect the Caixin / Markit PMI for September to hit 53.1, the same level as in August.

Companies surveyed said the epidemic was gradually easing and orders were growing rapidly.

Wang Zhe

Senior Economist at Caixin Insight Group

The private survey shows a greater mix of small and medium-sized businesses. In comparison, the official PMI survey typically surveys a large proportion of large corporations and state-owned companies.

The Caixin / IHS sub-index for total orders rose to its highest level since January 2011, and the indicator for new export orders rose to its highest level in three years.

"Strong demand allowed production to recover, with the production sub-index remaining high," wrote Wang Zhe, senior economist at Caixin Insight Group. "Companies surveyed said the epidemic was gradually wearing off and orders were growing rapidly," added Wang.

While the strength of the manufacturing sector will ease the strain on policymakers, the labor market in China remains "worrying," he said.

"Employment improvement depends on longer term economic recovery and a more stable external environment. In the near future, great uncertainties remain about the overseas pandemic and the US presidential election," Wang wrote.

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