BEIJING: China’s factory activity likely contracted in October for a sixth month, a Reuters poll showed on Tuesday (Oct 29), but by the tiniest of margins, backing officials’ optimism that recent fresh stimulus will get the world’s No 2 economy back on track.
A Reuters poll of 30 economists estimated the official purchasing managers’ index (PMI) will come in at 49.9, up from September’s reading of 49.8, but just below the 50-point threshold that separates contraction from activity.
The mood in the manufacturing sector has been depressed for months by tumbling producer prices and dwindling orders.
That said, although China’s exports, a lone bright spot, faded last month and the economy grew at the slowest pace since early 2023 in the third quarter, officials anticipate stimulus announced in late September will come through and take effect.
“Based on our comprehensive assessment, the economy in the fourth quarter is expected to continue the stabilisation and recovery trend that occurred in September,” Sheng Laiyun, the deputy head of China’s statistics bureau, told reporters following the third quarter data release.
China economists have previously pointed to how sentiment-based surveys often lag behind hard data indicators.
And analysts at the Economist Intelligence Unit, Standard Chartered and Citigroup were among the 10 institutions that forecast the US$19 trillion economy broke back into expansion this month, returning PMI readings of 50.4, 50.2 and 50.1, respectively.
That said, Goldman Sachs and Nomura both forecast the PMI would be at 49.8, while JPMorgan anticipates there was no change in manufacturing activity last month, with a 50 reading.
In a worrying sign, industrial profits recorded the steepest monthly decline of the year in September, data on Sunday showed, which the National Bureau of Statistics said was due to factors such as insufficient demand.
Other recent indicators pointed to increased deflationary pressures and subdued loan demand, raising further red flags over the economic recovery and strengthening the case for even more stimulus to galvanise growth.
China’s finance minister has vowed to introduce further fiscal stimulus, but has not announced a dollar figure for the package, leaving investors in limbo.
Earlier this month, local media outlet Caixin Global reported, citing sources with knowledge of the matter, that China may raise 6 trillion yuan (US$842.7 billion) from special treasury bonds over three.
The private sector Caixin PMI is forecast at 49.7, analysts polled by Reuters say, and will be released on Nov 1.
The official manufacturing PMI will be released on Thursday.
