China’s official manufacturing purchasing managers’ index (PMI) fell to 49.5 in October, down from 50.2 in September, with analysts pointing to weak exports and profit pressure. Within the official manufacturing PMI, the new-orders subindex dropped to 49.5, from 50.5 a month earlier, while the new-export-orders subindex fell to 46.8 from 47.8 in September. “Manufacturing activity fell back into contractionary territory after a temporary reprieve last month. Global demand for exports remained weak as the gauge for new export orders fell deeper into contraction again,” said Erin Xin and Jing Liu, Greater China Economists at HSBC. “Exports weakness is likely to continue to be a drag on China’s export sector for some time as other central banks keep restrictive monetary policy in place.” Meanwhile, the Caixin/S&P Global manufacturing PMI fell to 49.5 in October from 50.6 in September, marking the first contraction since July. “The Caixin manufacturing PMI declined under 50 in October, mirroring the change in the official manufacturing index. Taken together, the average of the two is consistent with a renewed deterioration in factory activity last month,” said Julian Evans-Pritchard and Sheana Yue, China Economists at Capital Economics.
China’s official non-manufacturing PMI stood at 50.6 in October, compared with 51.7 in September, and the main drag stemmed from weak capital market and real estate services, according to analysts. Within the non-manufacturing PMI, the construction subindex, partly affected by the ongoing property crisis, stood at 53.5, down from 56.2 in September. “According to the accompanying statement, most of the decline can be attributed to further weakness in the real estate and capital market services sectors,” added Evans-Pritchard and Yue at Capital Economics. The Caixin/S&P Global services PMI rose to 50.4 in October from September’s nine-month low of 50.2, although the pace of expansion remained much slower than the average in the first half of the year. “The average of the two services PMIs fell to a 10-month low of 50.3, well below its 2019 average of 52.8, and consistent with a further loss of momentum in the sector last month.”
The official composite PMI, which includes both manufacturing and services, fell to 50.7, down from 52 in September. Meanwhile, Caixin/S&P’s composite PMI declined to 50 from 50.9 in September, marking the lowest reading since December 2022. “The PMI surveys were unexpectedly weak across the board, with the composite measure falling to its lowest in eight years outside of Covid lockdowns,” added Evans-Pritchard and Yue at Capital Economics. “If the hard data released later this month are similarly weak, more will need to be done to ensure the recovery doesn’t slide backwards,” they added. China’s recent issuance of CNY1 trillion of sovereign bonds “will help to provide countercyclical support”, according to Xin and Liu at HSBC. “The PMI readings show that the recovery still faces pressure, which has also been reflected in the labor market as the gauges for employment remained in contraction in October,” they added. “This will likely prompt policymakers to maintain an easing bias to support growth through both monetary and fiscal policy.” On the monetary front, Xin and Liu expect a 50-basis-points cut to the reserve requirement ratio (RRR) by the end of the year to help provide liquidity support amid an influx of government bond issuance in the fourth quarter, the South China Morning Post reports.
China's 31 provincial-level regions have released their economic growth figures for the first nine months. Seventeen areas outperformed the national growth rate of 5.2% year-on-year in the first three quarters, with Tibet, Hainan and Inner Mongolia registering 9.8%, 9.5% and 7.2%, respectively. During the January-September period, 11 regions including Sichuan and Hubei provinces and Chongqing reported higher GDP growth rates than in the first half of the year. A total of 13 provinces and regions saw their GDP exceed CNY3 trillion in the first nine months, with GDP of Guangdong and Jiangsu surpassing CNY9 trillion in the first three quarters. Ye Yindan, Researcher at the Bank of China Research Institute, said he expects China’s GDP to grow around 5.7% in the fourth quarter, with a full-year GDP growth of around 5.3% in 2023, the China Daily adds.
