China’s manufacturing activity slows for the second month in a row – News Couple
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China’s manufacturing activity slows for the second month in a row


China’s manufacturing activity contracted for the second month in a row in October, as the fallout from the country’s property sector slump and energy shortages spread across the world’s second-largest economy.

Official data showed on Sunday that China’s manufacturing PMI came to 49.2 in October, below the 50-point threshold that indicates expansion rather than contraction.

The PMI data is the latest indication of a worsening economic slowdown as weak real estate construction activity and higher commodity prices slash industrial demand.

The scale’s drop from 49.6 in September also reflects disruptions in the electricity supply that are hitting factories from the rust belt in northern China to high-tech workshops in Guangzhou and Shenzhen.

The deteriorating economic background is increasing pressure on Xi Jinping and Beijing’s top planners as the country’s president leads an unparalleled series of economic and social reforms.

Under the slogan of advancing “shared prosperity,” Xi has led a strict regulatory reform, striking companies and business leaders across real estate, technology, games, entertainment and education.

But the wave of bad economic data is sparking fresh calls from Beijing for a softer policy approach, especially for the real estate sector, which has also been hit by debt problems at developer Evergrande.

The level of contraction in manufacturing activity in October was worse than the reading of 49.7 expected by analysts in a Bloomberg survey.

Goldman Sachs analysts noted that surveys also showed that “inflationary pressures continued to rise” as price increases for industrial inputs including petroleum, coal, chemicals and metals accelerated.

The figures released by the National Bureau of Statistics on Sunday came two weeks after data showed that economic growth in the third quarter fell to the slowest pace in a year.

According to Gavekal Dragonomics analysts, what was an expected slowdown in China after the post-Covid boom in the first half of 2020 has developed into a “terrifying loss of economic momentum”.

Obscuring China’s growth outlook has been a slew of supply-side difficulties. Since then, problems ranging from a shortage of computer chips to overstretched logistics networks in the early months of the pandemic have been exacerbated by disruptions in electricity supplies and sporadic shutdowns in response to the coronavirus outbreak.

However, “the real problem is on the demand side,” said Gavekal analysts, noting the deterioration of the real estate sector due to strict fiscal and regulatory policies.

“With the real estate sector being the most important driver of cyclical activity, overall growth will weaken further in [the fourth quarter] In 2022, Javikal analysts said in a research note prior to the release of the PMI.

They said Beijing had “only signaled a marginal easing of its tough real estate policies”.

China’s non-manufacturing PMI fell to 52.4 from 53.2 the previous month, while the composite index also approached contraction territory, at 50.8 from 51.7.



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