China: Manufacturing PMI tumbles in October; non-manufacturing PMI ticks up
Latest reading: In October, China’s manufacturing sector showed increased signs of weakness as the official Manufacturing PMI fell to 49.0 from September’s 49.8, coming in below market expectations. This marked the seventh consecutive month of contraction in factory activity. The downturn was characterized by output shrinking for the first time in six months and a more rapid decline in new orders. Furthermore, efforts to stimulate international demand led to intensified price competition rather than a boost in sales, with foreign sales experiencing their most significant drop since April.
The non-manufacturing sector saw a marginal change, with the official PMI standing at 50.1 in October, compared to a ten-month low of 50.0 in September. This figure slightly exceeded market expectations. Demand remained weak, with new orders and employment staying subdued, while foreign sales saw a further decline.
Panelist insight: Delving into the data, Nomura analysts said:
“The significant decline in manufacturing PMI was driven by a confluence of factors, including holiday effects from a later-than-usual Mid-Autumn festival, renewed uncertainty from the re-escalation of US-China trade tensions in early October, and intensified domestic growth headwinds from the payback effect of the trade-in program, the austerity measure, the anti-involution campaign, and the property sector fallout. The latest de-escalation of US-China trade tensions provides limited upside for the economy. The 10% tariff rollback should have a limited boost to export growth, as firms shift back from indirect routing back to direct shipping with the narrowed tariff arbitrage.”