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Not so fast with those cheers for China’s rebound—manufacturing activity nearly flat

HSBC’s China purchasing managers index , a private survey of manufacturing activity, fell far short of expectations in September, tempering optimistic projections for a rebound in world’s second-largest economy.

The PMI, derived from interviews with executives in over 420 manufacturing companies, grew slightly to 50.2 in September, up from 50.1 in August. Any figure over 50 indicates growth; below 50 indicates contraction. Analysts had expected the PMI to reach 50.9, while an earlier HSBC estimate predicted the figure would by 51.2, sparking reports of “fresh vigor” in the Chinese economy, which has slowed from its breakneck double-digit growth of previous years and is expected to grow 7.5% this year.

The final HSBC PMI September survey shows that factories cut jobs for the sixth month in a row, as order from overseas increased but not enough to offset slowing domestic demand.

“Growth is bottoming out on Beijing’s mini-stimulus,” Qu Hongbin, HSBC’s chief economist in China said in a statement. “We expect continuous policy efforts to sustain the recovery.” Qu has often called on Beijing to offer more stimulus to the economy.

“This is as good as it gets for the time being,” Frederic Neumann, MD and co-head of Asian economics research at HSBC, told CNBC. “It reflects the stimulus over the summer but don’t expect too sharp an acceleration from here.”

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