China manufacturing growth cools further
> Sector’s expansion in October was weakest in two years
BEIJING: China’s manufacturing sector in October expanded at its weakest pace in over two years, hurt by slowing domestic and external demand, in a sign of deepening cracks in the economy from an intensifying trade war with the United States.
Anxiety about China’s cooling growth and its likely drag on the global economy have vexed financial markets recently, and yesterday’s official Purchasing Managers’ Index (PMI) indicates more stress for investors through coming months.
The official PMI – which gives global investors their first look at business conditions in China at the start of the last quarter of the year – fell to 50.2 in October, the lowest since July 2016 and down from 50.8 in September.
It was a touch above the 50-point mark that separates growth from contraction for a 27th straight month, but undershot the 50.6 forecast in a Reuters poll.
The latest reading suggests a further loss of momentum in the world’s second-biggest economy, and the deteriorating environment for businesses could prompt more policy support from Beijing on top of a raft of recent initiatives.
“All the numbers from China’s PMI release today confirm a broad-based decline in economic activity,” said Raymond Yeung, chief economist for China at ANZ in a client note, adding that conditions for the private sector is “much worse” than headline data suggested.
“Besides an expected reserve requirement ratio cut next January, we expect future supportive policy actions to be measured. The government’s priority is to avoid a financial blow-up.”
New export orders, an indicator of future activity, contracted for a fifth straight month and at the fastest pace in at least a year. The sub-index fell to 46.9 from 48 in September.
While China’s exports have been pretty resilient largely as firms frontloaded shipments to dodge stiffer US duties, analysts see pressure building in coming months. The continued slump in export orders may be bearing that scenario out.
October is the first full month after the latest US tariffs went into effect. Washington and Beijing slapped additional tariffs on each other’s goods on Sept 24, and US President Donald Trump has threatened to hit China with more duties. – Reuters