China's manufacturing sector growth improved strongly at the start of the fourth quarter as output expanded at the fastest rate in over five-and-a-half years in October.
The seasonally adjusted Caixin factory Purchasing Managers' Index rose to 51.2 in October from 50.1 in September, survey data from IHS Markit showed Tuesday. The score was expected to remain at 50.1.
A reading above 50 indicates expansion, while a reading below 50 suggests contraction in the sector.
At the same time, the official manufacturing PMI rose to 51.2 in October from 50.4 in September, the National Bureau of Statistics reported. Similarly, the non-manufacturing PMI improved to 54.0 from 53.7 in September.
Citing the continued feed-through from the earlier policy easing, Julian Evans-Pritchard at Capital Economics expects activity to hold up well until early next year.
Beyond that, however, the recovery is likely to stall, the economist added. As the props to growth fade, they could re-expose the structural drags that continue to weigh on the economy and are likely to result in a renewed slowdown over the next couple of years.
"The economy seems to be stabilizing for the moment, owing primarily to policies implemented to sustain growth," Zhengsheng Zhong, director of macroeconomic analysis at CEBM Group said.
"Supportive policies must be continued, or industrial output may be dragged down by a slowdown in investment."
Data from IHS Markit showed that output grew the most since early 2011 on the back of inflows of new work. New order growth quickened to a 27-month record.
However, improved intakes in new work appeared to be driven by stronger domestic demand, as new export business declined slightly in October.
Despite higher production, stocks of finished goods increased only marginally as companies used their inventories to meet new orders.
In October, staff numbers declined at the weakest pace since May 2015. Companies that cut their workforce numbers generally commented on company down-sizing as part of efforts to reduce costs.
Further, faster growth in new orders and output led firms to raise their purchasing activity.
On the price front, manufacturers reported a sharp increase in average cost burdens in October, the quickest rate of input price inflation for just over five years. Consequently, output price inflation reached its fastest pace February 2011.
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