China’s factory activity returns to contraction in October

China’s factory activity slipped back into contraction territory in October, official data showed Saturday, despite sustained growth in high-tech industries, as the market for consumer goods weakened.

The manufacturing purchasing managers’ index (PMI), a closely watched gauge of industrial health, came in at 49.3 this month, below the 50 mark separating expansion from contraction.

The fall in manufacturing activity was in part driven by a week-long national holiday at the start of the month, as well as a “complex and volatile international environment”, according to NBS statistician Huo Lihui.

The figure, from the National Bureau of Statistics (NBS), missed the forecast of 49.9 by a Bloomberg survey of economists and was below the 50.1 and 49.8 recorded in September and August respectively

However, it was above the 49.2 recorded in July.

Prices for international crude oil have continued to climb, hiking up the prices of coal, rubber and plastic products, Huo said.

Despite “positive development momentum” within the high-tech sector fuelling the artificial intelligence boom, the PMI for the consumer goods industry in October was down 1.9 percentage points from the previous month, showing that “market activity has somewhat weakened”, he added.

Beijing is hoping for annual growth this year of 4.5 to 5.0 percent, its lowest goal in decades, as sluggish domestic demand weighs on its export strength.

“Strong exports alone are not enough to boost the economic momentum,” said Zhiwei Zhang, chief economist at Pinpoint Asset Management.

“If the external demand weakens in 2027, China will need more significant policy support to boost domestic demand,” he added.

The non-manufacturing PMI, which measures activity in other areas including services and construction, came in at 49.7 in October, the data showed.

That was lower than a Bloomberg forecast of 50.0, and down from the 50.2 recorded in September.

Huo, the NBS statistician, said the drop was “influenced by factors such as a decline in (business) prosperity within certain service sectors,” particularly the financial sector, but did not elaborate.

There was also a slowdown in construction activity compared to the previous month, Huo said.

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