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Economy

China's factory activity slows slightly in October: official PMI

Growth in services sector accelerates as economy continues rebound from pandemic

A worker is seen on a production line for Polestar, Volvo and Lynk&Co vehicles at a Geely plant in Taizhou, Zhejiang province, China.   © Reuters

BEIJING (Reuters) -- China's factory activity expanded at a slightly slower pace in October but was slightly above analysts' expectations, suggesting a continuing economic recovery as the country rebounds from the coronavirus shock.

The official manufacturing Purchasing Manager's Index (PMI) fell to 51.4 in October from 51.5 in September, data from the National Bureau of Statistics showed on Saturday, remaining above the 50-point mark that separates growth from contraction.

Analysts had expected it to slip slightly to 51.3 but said a broader recovery still appeared to be solidly on track.

The data, particularly new export orders, indicates October's trade figures should stay strong, Zhou Maohua, an analyst at China Everbright Bank, said in a note. However, the epidemic's spread overseas could increase uncertainties for China's exports over the next few months, said Zhou.

China's vast industrial sector is steadily returning to the levels seen before the pandemic paralysed huge swathes of the economy.

Pent-up demand, stimulus-driven infrastructure expansion and surprisingly resilient exports are propelling the rebound, though the global outlook is dimming as many Western countries battle renewed surges in the virus that causes COVID-19, with some going back into virus lockdowns.

The official PMI, which largely focuses on big and state-owned firms, showed overall new orders remained steady at 52.8, while new export orders rose to 51.0, improving from 50.8 a month earlier.

But smaller firms continued to struggle. A sub-index for those companies stood at 49.4 in October, slipping back into contraction from September's 50.1.

Companies also shed jobs for a sixth month in a row, and at a faster pace. A sub-index for employment fell to 49.3 from September's 49.6.

"The manufacturing industry overall continues to pick up," said NBS official Zhao Qinghe, while noting that small companies face weak market demand.

Some companies reported that the resurgence of the epidemic overseas had lengthened procurement periods for imports of raw materials and increased transport costs, Zhao said in a statement released with the data.

China's economy grew a weaker-than-expected 4.9% in the third quarter year-on-year. It is expected to expand around 2% for the full year - the weakest in over three decades but still much stronger than other major economies.

The pandemic has been largely controlled in China, with daily life in much of the country returning to normal, although an outbreak emerged recently in the western region of Xinjiang.

A sister survey on the services sector showed activity expanded for the eighth straight month, hitting the highest level since October 2013, as the removal of restrictions on public gatherings and movement bolstered consumer demand.

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