China Factory Activity Contracts for Seventh Consecutive Month in October
China's factory sector continued to shrink in October, marking the seventh straight month of contraction, according to an official survey released on Friday. This persistent downturn highlights the urgency for additional stimulus measures aimed at boosting domestic demand. Meanwhile, attempts to sustain growth by exporting goods abroad mainly shift price competition overseas.
Purchasing Managers' Index (PMI) Analysis
- The official manufacturing PMI fell to 49.0 in October from 49.8 in September, hitting a six-month low.
- This figure remained below the critical 50 threshold that separates expansion from contraction.
- The PMI also underperformed against the median forecast of 49.6 in a Reuters poll.
- The non-manufacturing PMI, covering services and construction, slightly increased to 50.1 from 50.0.
Challenges Faced by Manufacturers
Manufacturers have struggled to achieve a steady recovery since the COVID-19 pandemic. The ongoing trade war with US President Donald Trump has pressured factory owners to reduce dependence on the US, the world's largest consumer market.
Additionally, exporters face difficulties in new markets across Europe, Latin America, the Middle East, and Africa, frequently selling at a loss.
"Exporters increasingly selling at a loss in Europe, Latin America, the Middle East and Africa."
Economic Context and Market Sentiment
While the PMI survey expresses pessimism, official data from September indicated industrial output and profits grew for the third and second consecutive months, respectively. Analysts attribute these gains mainly to performance from large state-owned enterprises, suggesting a less optimistic overall economic scenario.
China's economic growth slowed to 4.8% in the third quarter, marking its weakest pace in a year.
"China's economic growth slowed to 4.8% in the third quarter, its weakest pace in a year."
Author's Summary
The sustained contraction of China's factory activity despite slight gains in services underlines deep economic uncertainties and the pressing need for stronger domestic demand policies.