For October, China’s manufacturing sector faced the most insurmountable challenges of all time. Additionally, the official Purchasing Managers’ Index (PMI) slumped to a six-month low of 49, indicating a shrinking sector. Analysts point to the combination of weakened demand and the impact of current trade tensions overall having a crucial effect on this major downturn.
The drop in the PMI is indicative of deeper worries about the overall state of the manufacturing industry. The new orders PMI fell by 0.9 points to 48.8, indicating a contraction in manufacturing demand. The new export orders PMI saw an even sharper decline of 1.9 points, coming in at 45.9. This decline is further confirmation that external, aggregate demand for Chinese goods has cooled, adding to the retrenchment of national production activity.
Experts note that project construction may have faced interruptions during the long holidays in October, contributing to the dip in manufacturing performance. Following a notable spike in industrial production growth in September, it appears that production activities have normalized, with growth stabilizing.
Market watchers point to the fact that export growth was almost definitely zero in October, thanks to base effects from prior months. It’s two-year CAGR (compound annual growth rate) has almost certainly gone up. This increase is in large part due to a return to the export front-loading ledge. Tariff re-escalations are foreseen in November and these activities are meant to mitigate risk from that event.
Even with such proactive measures, investment in the manufacturing sector might still have further plummeted. Underneath the surface overall sentiment is a sense of hesitance among manufacturers as they tread water amid storms on the home front and abroad.