BEIJING (Reuters) – China’s factory activity fared better than expected in September, stabilising after a slump in August, a business survey showed on Thursday, with a smaller decline in production countering an uptick in demand.

In September, the Caixin/Markit Manufacturing Purchasing managers’ index (PMI), rose to 50.0 from 49.2 in August. This is in contrast with analyst expectations of 49.5 according to a Reuters poll. A monthly growth or contraction is separated by the 50-mark.

Although the Chinese economy rebounded quickly after a last-year pandemic, it has lost momentum. Its sprawling manufacturing sector was affected by COVID-19, increased costs, production bottlenecks and, more recently, power shortages.

China’s power crisis is due to the shortage of coal and tougher emission standards. The strong demand from industries has prompted widespread restrictions on electricity use.

Although production decreased for the second month in a row, it did so at a slower rate.

Wang Zhe from Caixin Insight Group said, “The resurgence and lack of material supply in many regions slowed manufacturing company production,” in remarks released along with the data.

China is also dealing with small-scale coronavirus epidemics in its northeastern provinces of Fujian in the southeast and Heilongjiang in the north.

Wang said, “Surveyed companies stated the sharp increase in prices for energy and industrial metals as well as electronic raw materials was the main reason the cost rise.”

The data revealed that new export orders fell faster into contraction as the overseas market cooled. The pace at which factories laid off workers was faster than usual.

Wang stated that “the demand for consumer goods was low, which is indicative of consumers’ insufficient purchasing power.” He also said that intermediate goods demand was greater.

The sub-index that measures new orders has returned to expansion. The fastest rate of increase in input prices since May was a 12%.

Profits have been impacted by higher raw material prices. The August sixth month saw a slowdown in earnings at industrial businesses.