China’s Manufacturing and Services Indices Fall Below 50 as Demand and Output Weaken in October
Key Facts
China’s official manufacturing purchasing managers’ index stood at 49.3% in October, down 0.8 percentage points from September, according to data from the National Bureau of Statistics of China. The index fell from the previous month’s reading of 50.1% and moved below the 50 level that separates contraction from expansion. The non-manufacturing business activity index also fell to 49.7%, down 0.5 percentage points from the previous month. The readings mean that both the manufacturing and non-manufacturing activity indices were below the expansion threshold in October. The figures come amid weakness extending to output and new orders, with the index for large companies alone remaining above 50 among the company-size categories reported by the bureau.
In manufacturing, the output index fell to 49.8% in October, down 1.9 percentage points from the previous month. The National Bureau of Statistics said the reading indicates that “industrial production activity slowed.” The drop in output was greater than the decline in the overall manufacturing index, which lost 0.8 percentage points during the month. The new orders index also fell to 49.4%, down 1.1 percentage points from September. The bureau said this indicates “a decline in the level of activity in demand in the industrial market,” pointing to new orders and output both registering readings below the expansion threshold.
The decline was also evident in new export orders, with the index falling to 48.7 in October from 50.0 in September, according to the Associated Press. The current month’s reading puts the index below the 50 threshold, after it stood at the dividing line between contraction and expansion the previous month. By company size, large companies recorded 50.2% in October, compared with 48.4% for medium-sized companies and 47.5% for small companies, according to the National Bureau of Statistics. The index for large companies therefore remained above 50, while readings for medium-sized and small companies were below it. This divergence highlights how the overall manufacturing reading masked a difference between large companies and their smaller counterparts.
The 50 threshold provides the immediate framework for reading the monthly indices: readings below it indicate contraction in activity, while readings above it indicate expansion, according to the Associated Press. By this measure, the manufacturing index moved from 50.1% in September to 49.3% in October, while the non-manufacturing activity index fell to 49.7%. The output, new orders and export orders indices were also all below 50 in October. By contrast, large companies recorded 50.2%, while medium-sized and small companies remained below the threshold. These figures offer a mixed picture within manufacturing, with declines in the overall indices and measures of demand and output, while large companies remained in expansion territory.