China Factory Activity Gauge Signals Deepening Manufacturing Gloom

Updated  ET

Workers inspect Zeekr car bodies welded by robots at Zeekr's factory in Ningbo, China.
China’s nonmanufacturing PMI, which covers both service and construction activity, edged up to 50.1 for October from 50.0 in September. nick carey/Reuters

Quick Summary

  • China’s manufacturing PMI dropped to 49.0 in October from 49.8 in September, indicating contraction for seven consecutive months.

  • The new export orders subindex fell to 45.9 from 47.8 in September.

  • China’s nonmanufacturing PMI slightly increased to 50.1 in October from 50.0 in September, driven by service activity.

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  • China’s manufacturing PMI dropped to 49.0 in October from 49.8 in September, indicating contraction for seven consecutive months.

China’s economic momentum continued to weaken, with a manufacturing gauge signaling mounting headwinds for the world’s second-largest economy.

The official manufacturing purchasing managers index saw a sharp drop to 49.0 in October, from 49.8 in September, putting it below the 50 threshold that separates an expansion in activity from a contraction for seven straight months.

The closely watched indicator released by China’s National Bureau of Statistics on Friday was weaker than the 49.6 result tipped by a Wall Street Journal survey of economists.

China’s economic momentum has weakened since the middle of the year, with the slowdown in the property sector continuing to pressure domestic demand, said Zhiwei Zhang, chief economist at Pinpoint Asset Management.

The Chinese economy in the third quarter expanded at 4.8% compared with the same period a year earlier, its slowest pace in a year. Still, it is largely on track to meet the official 2025 growth target of around 5.0%, suggesting a major stimulus package is unlikely in the near term.

Beijing would just need around 4.2% growth in the fourth quarter to achieve that goal, which is easily within reach, according to Nomura economists.

There haven’t been signs that Beijing’s fiscal policy stance has changed significantly to counter pressure on the economy, Pinpoint’s Zhang said.

Given that the trade agreements between the U.S. and China on Thursday offered some reprieve for Chinese exports , he expects China’s macroeconomic policy to remain unchanged for the rest of this year and for fiscal policy to become more proactive early next year.

Details of Friday’s October PMI data indicated a broad-based slowdown in manufacturing activity, led by a plunge in the export order subindex.

The new export orders subindex fell to 45.9 from 47.8 in September, as the production subindex declined to 49.7 from 51.9 in September, after five months of staying above 50. The gauge for total new orders slid to 48.8 in October from 49.7 in September.

Capital Economics’ Zichun Huang noted that the new export orders index slumped to its lowest level since the initial fallout from the “Liberation Day” tariffs in April. The economist cautioned that “any boost to exports from the latest U.S.-China trade ‘deal’ is likely to be modest and wider headwinds to growth will persist.”

Still, Lynn Song, an economist at ING, said it will be interesting to see if the tariff reduction and extended trade truce with the U.S. will help support recovery in new export orders in next month’s PMI release.

China’s nonmanufacturing PMI, which covers both service and construction activity, edged up to 50.1 for October from 50.0 in September, the statistics bureau said.

The subindex tracking service activity rose to 50.2 from 50.1 in September, while the construction subindex declined to 49.1 from 49.3 in September.

Write to Singapore Editors at singaporeeditors@dowjones.com

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