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China PMI October 2019

China: Manufacturing PMI falls to eight-month low in October

The manufacturing Purchasing Managers’ Index (PMI) published by the National Bureau of Statistics (NBS) and the China Federation of Logistics and Purchasing (CFLP) fell from 49.8% in September to October’s 49.3%. The print was below the 49.8% result expected by market analysts. As a result, the index remained below the 50.0% threshold that separates contraction from expansion in the manufacturing sector for the sixth month in a row.

The deterioration in October reflected a decline in new orders and slower growth in total output. Consequently, purchasing activity and suppliers’ delivery times worsened in the same month. Although job creation improved slightly, it remained well below the 50.0% threshold. Despite news about an imminent trade agreement between China and the United States, the lack of tangible results and weak global growth led export orders to deteriorate in October. Moreover, input prices—a reliable leading indicator for inflation—receded in October.

Against this backdrop, Ting Lu, Lisheng Wang and Jing Wang, economists at Nomura, comment that:

“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.”

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