Manufacturing production continued to pick up for the third consecutive month in September, driven by the expansion of new orders and exports, sending positive signals for overall economic growth in the third quarter.

The National Bureau of Statistics and the China Federation of Logistics and Purchasing reported on Tuesday that the manufacturing Purchasing Managers' Index climbed to 51.1 in September from 51.0 in August, the highest since May 2012.

The sub-index indicated that new orders rose to 52.8 from 52.4 in August, and export orders increased to 50.7 from 50.2, according to the official figures.

If the reading is above 50 it signals expansion in the manufacturing sector, while below 50 shows contraction.

"The PMI figure in September indicates a steady growth of China's manufacturing economy amid strengthened entrepreneurs' confidence and social expectation," said Zhao Qinghe, a senior economist at the NBS.

Positive factors for the whole economy have been accumulating since the second quarter, supported by a series of economic policies targeting long-term growth stabilization, economists said.

"Manufacturing enterprises are expanding production by increasing raw material purchases, which has lifted commodity prices," Zhao said.

However, the September PMI showed a contrary situation between small and bigger manufacturing firms. For the small-scale business, the PMI was 48.8, down from 49.2 in August, which showed a more serious contraction.

Nevertheless, the PMI for large companies increased to 52.1 from 51.8.

Zhang Liqun, an analyst with the Development Research Center of the State Council, said that "although the September PMI maintained expansion, the growth margin has narrowed considerably, indicating that the rising momentum for the overall economy is not strong enough".

Future economic growth will be stable without an obvious rebound, Zhang said.

"Entrepreneurs showed their cautious expectations of the future market," he added.

On Friday, the NBS released data about industrial companies' profits in the first eight months, showing that they increased by 12.8 percent year-on-year, up 1.7 percentage points from the Jan-July figure.

In August, industrial profits grew 24.2 percent from a year earlier, compared to 11.6 percent in July.

Zhu Haibin, chief economist in China from JP Morgan, said that the stronger-than-expected economic activity data in July and August, plus the solid reading in the manufacturing PMI in September, point to upside potential for the GDP forecast in the third quarter, which may accelerate to 7.6 percent.

China's GDP growth slowed to 7.5 percent in the second quarter from 7.7 percent in the first.

"Manufacturing investment, which has decelerated for the past two years, started to recover in August," said Zhu.

Together with the increasing external demand that has benefited from the improvement in growth outlook in advanced economies, especially in the Euro area, China is likely to maintain the recovery in growth momentum during the short term, he said.

"Nonetheless, we remain cautious on the sustainability of the ongoing recovery. We expect the recovery to last until the end of the year and to slow again in 2014."

The government has accelerated investment in railways and public housing construction, and introduced measures to help small-scale businesses.

Premier Li Keqiang pledged on Monday to "deepen reform across the board for long-term, sustainable and sound economic growth and social progress," especially in fiscal, taxation, banking and investment areas.

On Monday, a separate manufacturing PMI report from HSBC Holdings also posted a slight rise of the figure in September at 50.2, up from 50.1 in August, signaling that operating conditions improved fractionally since the previous month.

Chenjia1@chinadaily.com.cn

(China Daily USA 10/02/2013 page3)