China's September official PMI steady at 51.1

BEIJING (Reuters) – Growth in China‘s manufacturing sector held up in September as large state factories benefitted from steady domestic demand, welcome news for investors a day after China cut mortgage rates for the first time since 2008 to lift its flagging economy.

The official Purchasing Managers’ Index (PMI) hovered at 51.1, the National Bureau of Statistics said on Wednesday, a touch ahead of forecasts for a 51.0 reading.

A PMI reading above 50 indicates growth on a monthly basis, and a reading below that points to contraction.

The survey suggested that demand for goods produced by large state-owned factories was stronger within China than in overseas markets.

The new orders sub-index, a proxy for foreign and domestic demand, stood at 52.2, down slightly from 52.5 in August but well above the 50-point mark that indicates growth on a monthly basis.

The new export orders sub-index, on the other hand, edged up to 50.2 to stand just a whisker above the 50-point boom-bust level.

Wednesday’s data may assure investors that the world’s second-biggest economy, which has stumbled this year, is not doing as badly as some feared. But at the same time, some analysts warned investors against thinking that growth had picked up markedly.

Profits at China’s industrial companies fell 0.6 percent in August from a year earlier, reversing from July’s 13.5 percent annual rise, the government said on Saturday.

“The economy still faces a degree of downward pressure,” Chen Zhongtao, an official at the China Federation of Logistics and Purchasing, which helps to publish the PMI data, said in a statement.

Hurt by unsteady exports, a housing downturn and cooling investment growth, the world’s second-largest economy has wobbled this year, raising doubts about whether it can grow by around 7.5 percent in 2014 as targeted by Beijing or whether it may be at risk of a sharper slowdown.

To shore up growth, China cut mortgage rates and down payment levels for some home buyers on Tuesday for the first time since the 2008 global financial crisis, making one of its biggest moves this year to boost an economy increasingly threatened by the sagging housing market.

(Reporting by Koh Gui Qing; Editing by Kim Coghill)

China's September official PMI steady at 51.1