Explainer | China’s economic recovery momentum ‘takes a step back’: 4 takeaways from October’s manufacturing, services activity

Both China’s official manufacturing purchasing managers’ index (PMI) and the Caixin/S&P Global manufacturing PMI fell into contraction in October

China’s official non-manufacturing PMI also fell, but the Caixin/S&P Global services PMI rose slightly from a nine-month low in September

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Both China’s official manufacturing purchasing managers’ index (PMI) and the Caixin/S&P Global manufacturing PMI both fell into contraction in October. Photo: Xinhua

Published: 7:00am, 4 Nov 2023

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1. ‘A renewed deterioration in factory activity’

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. For one, 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 drag on China’s external 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.