China Manufacturing Activity Continues To Contract

China’s manufacturing activity continued to shrink in October, albeit at a slower pace, as Covid-19 outbreaks and consequent tightening of prevention measures dampened production and demand.

The Caixin manufacturing Purchasing Managers’ Index rose to 49.2 in October from 48.1 in the previous month, data from S&P Global showed on Tuesday. Nonetheless, the score has remained below the neutral 50.0 for the third straight month suggesting contraction.

Elsewhere, the official counterpart published on Monday also showed that the index dropped to 49.2 from 50.1 in September.

The private survey showed further declines in both output and new orders, with Covid-19 a principal factor behind lower client demand and disrupted factory operations. Nonetheless, decreases were only mild and slowed in both cases.

There were another decline in new orders from foreign markets, reflecting slowing global economic growth and challenges in transporting goods overseas.

Companies reduced their workforce numbers mainly due to the automation of some processes. Employment declined for the seventh consecutive month.

Meanwhile, manufacturers ramped up their purchasing activity in October, marking the first such increase since July and pre-production inventories rose for the first time in three months.

Selling prices were lowered for a sixth successive month in October in order to stimulate sales and improve competitiveness, the survey showed.

Business optimism recovered slightly from September’s 34-month low as capacity expansion and new product launches were expected to support growth over the coming year.

The economy is struggling to hold on to its gains over the summer, Capital Economics economist Zichun Huang said.

The economist observed that with the zero-COVID policy remain in place, virus disruptions worsening again, the property sector still in a downward spiral and exports set to fall, momentum is likely to remain weak in the near-term.

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