China's economy showed early signs of having bottomed out across the board in October, indicating that the country's ramped-up efforts to revitalize domestic spending against external uncertainties are starting to yield effects, analysts said on Tuesday.
They commented as data from media group Caixin pointed to the fastest expansion of services activity in three months while manufacturing activity resumed upward momentum, matching the improvements of official indicators.
David Chao, global market strategist for the Asia-Pacific region (excluding Japan) at Invesco, said: "China's leading economic indicators improved across the board for October, suggesting that the economy continues to regain momentum. This should translate into improving economic conditions and activity for the rest of the year."
A privately surveyed purchasing managers index for the services sector came in at 52 in October, up from 50.3 in September and marking the highest reading in three months, a Caixin report said on Tuesday. Any PMI reading above 50 indicates an expansion in activity.
The reading fared better than 50.3 which many analysts had expected as the rate of expansion in new business inflows rose for the first time in four months following the launch of a series of policies to shore up the economy since late September.
In October, the level of confidence among service providers rose to the highest since May, while selling prices stabilized after falling for two successive months. Service providers raised staffing levels for a second consecutive month, albeit marginally, the report said.
The uptick in services activity came along with manufacturing activity resuming expansion in October, driven by renewed new business growth. The Caixin China General Composite PMI, covering both manufacturing and services activity, came in at 51.9 in October, up from 50.3 the previous month, marking the highest showing in four months.
Also indicative of momentum recovery, the official composite PMI came in at 50.8 in October, up from 50.4 a month earlier, the National Bureau of Statistics said on Thursday.
Wang Zhe, senior economist at Caixin Insight Group, said that the PMI surveys showed that market demand stabilized and optimism improved, which are early signs of the new policies' impact, though the labor market remained under pressure while prices were still subdued.
China is expected to further consolidate its policy support as the country's top legislature is expected to approve additional fiscal support this week.
Zhang Bin, deputy director of the Chinese Academy of Social Sciences' Institute of World Economics and Politics, said China's current round of countercyclical adjustments is ultimately aimed at promoting a robust recovery in overall income levels, which is key to further lifting consumption.
The task of convincing consumers to spend more is deemed by analysts to be of particular importance against elevated external political and trade uncertainties and amid China's pursuit of a more consumption-oriented growth model.
While services providers polled by Caixin reported a solid increase in exports in October, export orders in the manufacturing sector remained in decline, though the rate of reduction eased. The official PMI survey showed that manufacturers' new export orders contracted at a faster rate in October.
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