China factory outlook improves in September ahead of US talks

Bloomberg

China’s manufacturing sector improved in September on an uptick in new orders and infrastructure spending, but with the data showing factories still contracting and other indicators pointing to economic weakness, it’s not unalloyed good news for policy makers.
The manufacturing purchasing managers’ index rose to 49.8, according to data released by the National Bureau of Statistics on Monday. That’s better than forecast in a survey but the fifth month it’s been below the 50 level which divides expansion from contraction.
The gauge for output rose to 52.3, new orders returned to expansion and new export orders improved but were still in contraction zone.
Along with the trade war with the US, China’s leaders are contending with rising food prices and a domestic economy which continues to slow.
So far they have continued their policy of limited and targeted stimulus measures to prevent a rerun of the debt-fuelled bubbles of the past, but if there is no turnaround in growth the pressure to do more will continue to grow.
“It is a small, unexpected rebound in the downward cycle, and the overall outlook is still grim,” said Zhou Hao, a senior emerging markets economist
at Commerzbank AG in Singapore. “It is a bit better than expected, maybe due to the end-of-quarter factor, but the market won’t take it as a signal of a turning point.”
An improvement in relations with the US helped boost the numbers, according to Tommy Xie, an economist at Oversea-Chinese Banking Corp in Singapore. The US postponed the next round of tariff increases and China has restarted large-scale purchases of US agricultural goods.
Vice Premier Liu He and other senior officials are expected to meet with their US counterparts for trade talks on October 10-11, days before the next scheduled rise in US duties on Chinese goods. After the recent goodwill gestures by both sides there is some hope of a possible deal in the trade war that is dragging on the global economy.