China’s Oct factory activity unexpectedly skids amid slowing demand

The official manufacturing purchasing managers’ index (PMI) stood at 49.2 from a 50.1 reading in September, the National Bureau of Statistics (NBS) said. Economists in a Reuters poll had expected the PMI to come in at 50.0, which would have suggested no change in the pace of activity.

China’s economic growth beat expectations in the third quarter, but persistent Covid-19 curbs, a prolonged property slump and global recession risks clouded a more robust revival in the longer term.

As of last week, 31 cities have implemented various levels of lockdowns or some kind of district-based control measures, affecting around 232.0 million people, Nomura said in a research note.

Economists see China’s current zero-Covid policy as a major constraint on the economy and expect restrictions to stay in place for some time after this month’s Communist Party Congress.

That has raised concerns that Beijing’s new political leadership could prioritise containing Covid-19 over economic growth.

Economists expect China will miss its annual growth target of around 5.5% with the latest Reuters poll forecasting 2022 growth at 3.2%. The poll showed China’s growth could pick up to 5.0% in 2023.

The official non-manufacturing purchasing managers’ index (PMI) stood at 48.7 from 50.6 in September. The composite PMI, which includes both manufacturing and services activity, registered at 49.0 from 50.9 the previous month.

The official manufacturing PMI largely focused on big and state-owned firms. The private sector Caixin manufacturing PMI, which centres more on small firms and coastal regions, will be published on Tuesday.