2019.11.0104:44:00UTC+00China Manufacturing Sector Expands Most Since Early 2017

China's manufacturing sector logged its fastest expansion since early 2017 in October, data from IHS Markit showed Friday.

The Caixin manufacturing Purchasing Managers' Index rose unexpectedly to 51.7 from 51.4 in September. The reading was forecast to drop to 51.0. A score above 50 indicates expansion.

The index has now signaled an improvement in operating conditions for the third straight month, with the latest improvement the strongest since February 2017.

"If the improvement in demand, including that generated by infrastructure projects and exports, is able to continue, the manufacturing sector can gradually build a foundation for stability," Zhengsheng Zhong, director of macroeconomic analysis at CEBM Group said.

However, according to official survey, the manufacturing sector contracted the most since last February. The PMI dropped to 49.3 in October from 49.8 a month ago.

A divergence in the official and unofficial PMIs makes it unusually difficult to gauge how the economy performed at the start of the fourth quarter, Julian Evans-Pritchard, an economist at Capital Economics, said.

On balance, growth appears to have picked up last month but activity is unlikely to be as strong as today's PMI release implies, the economist added.

Markit survey showed that new orders increased at the fastest pace seen in 81 months as export orders grew for the first time in five months. With rising demand, manufacturers expanded production.

As a result, companies increased their purchasing activity at the fastest pace for 20 months. However, efforts to contain costs contributed to a further drop in staffing levels.

On the price front, the survey showed that factory gate prices fell slightly at the start of the fourth quarter as firms sought to remain competitive. At the same time, average cost burdens rose only marginally.

Further, the survey showed that business confidence regarding the 12-month outlook for output improved to its highest since April.