In a notable development for the Chinese economy, the official Purchasing Managers’ Index (PMI) for October registered a reading of 50.1, marking its first month of expansion since April. This figure, reported by the National Bureau of Statistics, exceeded market predictions of 49.9 as indicated by a Reuters poll and represented a slight increase from September’s reading of 49.8. The PMI is a crucial indicator of economic health, where a score above 50 signifies expansion, while a score below indicates contraction. The last time the PMI breached the 50-point barrier was in April, when it achieved a reading of 50.4.
Zhiwei Zhang, the president and chief economist at Pinpoint Asset Management, expressed optimism for the upcoming quarter, anticipating a moderate improvement in economic momentum as a result of loosening monetary and fiscal policies. This sentiment is particularly relevant as China’s parliamentary standing committee is set to convene next week, with expectations that they will unveil plans for fiscal stimulus following their session ending on November 8.
The sub-index focused on production stood at 52, signaling a positive trajectory for manufacturing outputs. Conversely, the new orders sub-index was steadied at 50, indicating stability in demand. However, concerns linger over inventory levels for raw materials, which remained in contraction at 48.2, alongside employment figures at 48.4, though slightly improved from the previous month.
The non-manufacturing PMI also reflected a modest rise, climbing to 50.2 in October from September’s 50. While this indicates growth, it remains lower than August’s figure of 50.3. The employment segment within this PMI showed some strain, with an increase of 1.1 percentage points leading it to 45.8, suggesting ongoing challenges in job creation within the non-manufacturing sector.
Further insights from an American survey, the China Beige Book, indicated a year-on-year improvement in manufacturing output among 1,436 surveyed Chinese firms. Additionally, there was a positive uptick in both domestic and export orders, with particular note that American export orders exhibited a less severe downturn in October compared to previous months.
Despite these promising indicators, China’s economy has faced systemic slowdowns, primarily attributed to subdued consumer demand and a struggling real estate market. Conversely, the export sector has stood out as a glimmer of hope amid broader challenges. The financial markets responded positively to recent high-profile stimulus measures announced by the government, including a notable meeting led by President Xi Jinping that emphasized the need for reinforced fiscal and monetary support.
As investors and economic analysts closely monitor these developments, the upcoming release of the Caixin China general manufacturing PMI and the services PMI later in the week are expected to provide further clarity on the ongoing recovery and the resilience of various sectors within the Chinese economy. Overall, while challenges remain, the October PMI figures suggest a cautious yet hopeful return to growth.
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