Manufacturing in China turns positive after months of contraction

A key manufacturing index in China turned positive in October after months of contraction

A closely watched survey on manufacturing in China has edged into positive territory after months of contraction, the government statistics agency said Thursday.

The Purchasing Managers’ Index rose to 50.1. A reading above 50 indicates an improvement over the previous month. It was the first improvement after five straight months of decline.

“The 50.1 level is the smallest possible expansion for the PMI but nonetheless bucks expectations for continued contraction, and is a positive sign that the small bounce back of industrial production that we saw in September could continue,” Lynn Song of ING Economics said in a note.

Song said subindices showed signs there could be a “gradual improvement” domestically.

The production subindex hit a six-month high of 52.0, and new orders returned to a reading of 50.0 after five months of contraction. Other subindices such as employment, purchases, imports and backlog of orders also saw smaller declines compared to the previous month, Song said.

Non-manufacturing activity also rose to 50.2 this month, up from 50.0 in September.

The rise follows the central bank’s announcement of a series of steps to boost the economy in late September, including reducing the amount of reserves banks are required to keep and slashing interest rates on loans to commercial banks.

Investors and business owners are waiting to see if the government approves additional stimulus measures for the economy at a meeting of China’s top legislative body next week.