China’s Manufacturing PMI Falls to 49.3 in October After Returning to Expansion in September
Key Facts
China’s official manufacturing purchasing managers’ index fell to 49.3 in October, returning to contraction after reaching 50.1 in September, according to data from the National Bureau of Statistics and an Associated Press report. The decline came after the index returned to expansion in September for the first time in three months, rising from 49.8 in August. The production index fell to 49.8, down 1.9 points from the previous month, while new orders came in at 49.4, down 1.1 points. New export orders also fell to 48.7 from 50.0 in September. The readings show simultaneous declines in production, domestic demand and external orders in October.
The National Bureau of Statistics’ chief statistician attributed the decline in factory activity to factors including some orders being brought forward ahead of the Golden Week holiday and a more complex international environment. The bureau said, "Some orders were brought forward ahead of the National Day holiday, alongside a more complex and changing international environment." A Reuters report added that overseas Christmas-season orders, which had been brought forward in September, eased in October. The impact of National Day holiday spending also faded after the first week of the month. Both factors coincided with weak domestic demand, which is weighing on industrial companies’ activity.
The Associated Press reported that weak domestic demand is affected by the property sector’s years-long decline, and that Chinese companies are shipping more goods overseas in search of buyers. In a separate reading of pressure on the economy, Zhang Liqun, an analyst at the China Federation of Logistics and Purchasing, said, "Insufficient demand is increasing downward pressure on the economy," according to a Reuters report. This places the weakness in new and export orders in the context of soft domestic demand and the search for overseas buyers. The lull in seasonal orders brought forward in September also reduced the support factories received in the previous month. October’s reading shows contraction in both demand and production components.
Activity varied by company size: the index for large companies was 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. Large companies alone were above the expansion threshold among the three size groups. By contrast, the high-tech manufacturing index remained at 51.3 and the equipment manufacturing index at 50.6, both above the expansion threshold. The divergence highlights continued activity in some size groups and sectors alongside contraction in the overall index. It did not prevent the headline manufacturing reading from falling to 49.3.
The decline extended beyond factories: the non-manufacturing activity index, which includes services and construction, fell to 49.7 in October from 50.2 in September, according to Reuters. The composite output index also declined to 49.7, down 1.0 point from the previous month, according to the National Bureau of Statistics. The composite reading brings together manufacturing and non-manufacturing activity, and both indexes recorded contraction in October. In the industrial price survey, the purchase price index for major raw materials fell to 56.8 from 60.8 in September. The producer price index also declined to 51.7 from 54.0, with both indexes remaining above 50, a level consistent in these price readings with rising prices compared with the previous month.
Markets are awaiting the October reading of the private RatingDog manufacturing index on 2 November, according to a Reuters poll. The poll expected the index to come in at 51.6, compared with September’s reading of 52.1. This private index offers a different reading from the official survey, but no verified original October reading was available in the information at hand. The 51.6 figure therefore remains the poll forecast, not a published result. The anticipated private reading will provide an additional comparison with official survey data showing manufacturing contraction in October.