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China business activity growth hits 5-month high in September on factory boost

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China business activity growth hits 5-month high in September on factory boost

Business activity growth in China rose to a five-month high in September as factory output increased at a faster rate, according to data from Caixin and IHS Markit.

The Caixin China Composite Output Index, which covers manufacturing and services, improved to 51.9 in September from 51.6 in August, marking its strongest level since April.

The increase was driven by the manufacturing sector, which saw production rise at the fastest pace since August 2018. In contrast, the Services Business Activity Index fell to a seven-month low of 51.3 from 52.1.

At the composite level, growth in new orders was the highest since February 2018, though new work from abroad continued to fall as factory firms saw a decline in export sales for the fourth month in a row.

Companies continued to hire more workers, with staffing levels rising at the fastest pace since January 2013.

However, business confidence weakened as the degree of optimism in the services sector fell. Zhengsheng Zhong, director of macroeconomic analysis at CEBM Group, said exchange rate fluctuations and higher costs of labor and raw materials may have contributed to a weaker level of confidence among companies.

"After a fast slowdown in previous quarters, China's economic growth began to show signs of stability," Zhong said.