China’s factory activity likely to remain low in Oct. – Poll

China’s factory activity is expected to show a slight contraction in October for the sixth consecutive month, a Reuters poll showed on Tuesday. However, officials remain hopeful that recent stimulus measures will help the economy rebound.

The official purchasing managers’ index (PMI) is projected to be 49.9, slightly higher than September’s 49.8, but still below the 50-point mark indicating contraction.

The manufacturing sector has been struggling due to falling producer prices and declining orders. Despite a slowdown in China’s exports and the economy growing at a slower pace in the third quarter of 2023, officials are optimistic that the stimulus measures announced in late September will have a positive impact.

Sheng Laiyun, deputy head of China’s statistics bureau, stated that the economy is expected to stabilise and recover in the fourth quarter following the trends witnessed in September 2024.

Chinese economists noted that sentiment surveys tend to lag behind actual economic data. Analysts from various institutions predicted that China’s economy would return to growth this month, with PMI readings ranging from 50.1 to 50.4.

However, some forecasts differed, with Goldman Sachs and Nomura expecting a PMI of 49.8 and JPMorgan predicting no change in manufacturing activity with a reading of 50.

Industrial profits in September saw the sharpest monthly decline of the year, according to data released on Sunday by the National Bureau of Statistics. This drop was attributed to factors like insufficient demand.

Recent indicators also suggest rising deflationary pressures and weak loan demand, signalling potential challenges for the economic recovery. This underscores the need for additional stimulus measures to boost growth.

China’s finance minister has promised more fiscal stimulus without specifying the amount, causing uncertainty among investors. Reports suggest China may issue 6 trillion yuan in special treasury bonds over three years.

The private sector Caixin PMI is expected to be 49.7 and will be released on Nov. 1.

Attribution: Reuters

Subediting: Y.Yasser