China's October Economic Activity Slows Sharply, Factory Gauge Contracts

what happened

China's economic activity lost considerable momentum in October, with manufacturing, services and construction gauges all pointing to weaker conditions. According to the National Bureau of Statistics, released on Saturday, the official manufacturing purchasing managers index dropped to 49.3 from 50.1 in September. That was below the 49.8 forecast by economists in a Wall Street Journal survey, and the index slipped back under the 50 line that separates expansion from contraction after a brief rebound.

The production subindex fell to 49.8 from 51.7, new orders slid to 49.4 from 50.5, and new export orders declined to 48.7 from 50.0. The non-manufacturing PMI, covering services and construction, eased to 49.7 from 50.2. The services subindex edged down to 50.0 from 50.2, while the construction subindex fell sharply to 48.0 from 50.3.

why it matters

Weak factory and export order data strengthen expectations of further support measures for China's economy. For commodity markets, it signals softer demand for metals and energy, while the yuan and Chinese equities may face pressure.

market impact

Copper and iron ore: weaker Chinese demand puts pressure on commodity prices

• ▼Copper pressure down — slower Chinese factory output and weaker orders reduce metals demand
• ▼Iron ore pressure down — construction activity contracted, cutting steel and ore needs

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