30 September 2012 Last updated at 23:44 ET

China manufacturing activity shrinks again in September

The last time manufacturing contracted for two straight months was during the 2008-2009 global financial crisis

Manufacturing in China has contracted for a second month, another sign of economic slowdown in the world's second largest economy.

The Purchasing Managers' Index (PMI) rose to 49.8 in September, government data showed. That comes after a reading of 49.2 in August.

A reading below 50 indicates a contraction in activity, while a reading above 50 indicates expansion.

Weak external and domestic demand has weighed on Chinese manufacturers.

Seasonal uptick

Although the reading was below 50, it was an increase from the August figure.

Many analysts said the PMI reading tends to improve in September for seasonal reasons, however the improvement was less than expected this year.

"September PMI readings are normally fairly strong, and we don't see that this month is that much better than last month," said Prakash Sakpal of ING.

China's top leaders have warned that growth may slow further before rebounding.

Demand woes

The data from the National Bureau of Statistics showed that demand for refined metals, steel and other materials used for building remains subdued.

China's real estate sector has seen a slowdown in recent months mainly due to government curbs to bring down sky-rocketing prices.

The government has recently announced spending on infrastructure projects, seen by many as a stimulus measure to boost growth.

China's economy grew at its slowest pace in three year in the second quarter.