China's October factory activity falls to 49.3, third contraction in four months

what happened

Activity at China's factories unexpectedly contracted in October for the third time in four months. The official manufacturing purchasing managers' index fell to 49.3 from 50.1 in September, the National Bureau of Statistics said. A Reuters poll had expected 50.0.

The bureau linked the drop to fading overseas orders for Christmas goods, which had been placed early in September, and to a slump in consumer spending after the National Day holiday. Both new orders and new export orders stayed in contraction. The non-manufacturing PMI, covering services and construction, also slipped to 49.7 from 50.2.

Some areas held up. Railway, shipbuilding, aerospace and electronics makers all reported readings at or above 53.0. Zhongji Innolight, a maker of optical modules for AI data centres, nearly tripled third-quarter net profit, while furniture maker Oppein Home saw profit plunge 80%.

why it matters

The weak data raises expectations of further support from policymakers, though Beijing still believes the 4.5-5.0% growth target can be met without new stimulus. For markets, the signal matters for the yuan, for demand for raw materials such as copper and iron ore, and for Chinese equities.

market impact

Chinese stocks and metals demand: weak factory data cuts expectations for raw material consumption

• ▼Iron ore pressure down — weaker factory demand reduces steel output needs
• ▼Yuan pressure down — soft data raises pressure for policy easing and weighs on the currency

tags

instruments