SHANGHAI: Factory activity in China unexpectedly expanded after five months of contraction, suggesting recent stimulus efforts may have started to boost growth momentum.

The official manufacturing purchasing managers’ index (PMI) rose to 50.1 in October from 49.8 last month, the National Bureau of Statistics (NBS) said yesterday.

That’s above the 50 mark that separates expansion and contraction from the previous month and compares with an average forecast of 49.9 by economists polled by Bloomberg News.

The non-manufacturing measure of activity in construction and services rose to 50.2 from 50 last month, the statistics office said.

This compares to a forecast of 50.3.

The PMI survey provided the first official economic indicator for the month after China introduced its boldest stimulus package since the pandemic.

“China’s economic activity continued to recover and improve in October as a package of new policy measures was implemented and existing policies gradually began to have an impact,” said Zhao Qinghe, senior statistician at the NBS. in a statement.

The offshore yuan saw a slight loss of 0.1 percent in morning trade. China’s 10-year government bond yields were flat at 2.16%.

A measure of manufacturing activity in line with the manufacturing PMI rose to 52, the highest in six months, while new orders stabilized.

But new export orders remained weak and continued to contract, falling slightly to 47.3.

“Going forward, we will have to see whether the stimulus rollout can lead to a recovery in domestic demand to offset what appears to be a still-weakening external demand picture,” said Lynn Song, chief economist for Greater China at ING Bank.

China’s central bank triggered sharp interest rate cuts and measures to support the housing market in late September.

The government is expected to announce more details of its fiscal policy support next week at a much-anticipated meeting of the country’s top lawmakers.

The stimulus push could help the world’s second-largest economy meet its official expansion target of about 5 percent for this year.

The economy expanded at its slowest pace in six quarters in the three months ended September, despite early signs of an improvement in consumption in the final weeks of the period.

A collapse in the housing market has also dampened consumer appetite, and the economy faces long-term challenges, including rising trade tensions, entrenched deflationary pressure and a shrinking population. — Bloomberg