FACTORY activity unexpectedly expanded at the fastest pace in well over two years in October as new export orders rose and plants ramped up production, a private business survey showed Friday.

The Caixin/Markit Manufacturing Purchasing Managers’ Index (PMI) for October rose to 51.7 from 51.4 in September, marking the third straight month of expansion. Economists polled previously had expected a dip in growth to 51.

The pace of improvement in September was the quickest seen since February 2017, when it was also 51.7.

“Both domestic and foreign demand improved substantially,” said Zhong Zhengsheng, director of macroeconomic analysis at CEBM Group.

New export orders for Chinese manufacturers bounced back into expansionary territory for the first time in five months in despite of the trade tensions.

This was likely due to the United States choosing to temporarily exempt more than 400 types of Chinese products from additional tariffs in September, Zhong said.

The Caixin survey showed that total new orders increased at the fastest clip in over six years, while growth in production picked up to the highest since the end of 2016.

The better-than-expected results stand in contrast with an official survey published Thursday, which showed China’s factory activity shrank for the sixth straight month in October.

The official survey focuses more on heavy industry than Caixin’s, and the two surveys also cover different geographical areas.

The survey showed that the labor market remained subdued, with an employment sub-index dropping from the previous month and contracting at the fastest rate since September last year. (SD-Agencies)