Chinese factory activity contracted for a sixth-straight month in October, data showed Thursday, as the key manufacturing sector suffers under the weight of a slowing domestic economy and the long-running US trade war. The figures are the latest to highlight a slowdown in the world's number two economy, which in the third quarter expanded at its slowest rate for nearly three decades.
The closely watched Purchasing Managers' Index (PMI), a key gauge of activity in the country's factories, fell to 49.3 last month, the National Bureau of Statistics said. That is well short of forecasts of 49.8 and also down from September's figure of the same amount. China's official PMI has fallen below the 50 mark that separates growth and contraction every month since April. And in a sign of further problems, the sub-index for new export orders was down 1.2 percentage points, the data showed.
Local industry had been affected by slow foreign trade and "falling market demand", said NBS senior statistician Zhao Qinghe. Julian Evans-Pritchard, senior China economist at Capital Economics, said the reading showed that a slight improvement seen in September "didn't mark the start of a sustained recovery". The decline in new export orders pointed to a further slowdown in export growth, he added.
"Given strong growth headwinds (especially from exports and the property sector) and still elevated US/China trade tensions, we expect the official manufacturing PMI to remain sluggish in coming months, the growth slowdown could gather pace, and markets could become more volatile in coming months," said Ting Lu, chief China economist at Nomura, in a research note. While the figures were bleak, there is some optimism as China and the US show progress in trade talks, with the economic superpowers pushing to get presidents Donald Trump and Xi Jinping to sign a "phase one" mini agreement next month.
China and US trade negotiators will speak again by phone on Friday, Beijing said Thursday, adding that negotiations were making "smooth progress". Beijing has implemented a number of measures to try and stimulate the economy, including slashing the amount of cash banks must keep in reserve in a bid to free up about $126 billion to boost lending.
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