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Oct manufacturing PMI retreats amid lingering downward pressure

Updated: Nov 3,2014 6:43 AM     Xinhua

BEIJING -- China’s manufacturing activity continued waning in October with the purchasing manager’s index (PMI) hitting a five-month low, official data showed on Nov 1.

The manufacturing PMI, a key measure of factory activity in China, measured 50.8 in October, down 0.3 percentage points from September, according to the data released by the National Bureau of Statistics (NBS) and the China Federation of Logistics and Purchasing (CFLP).

The October reading was 0.9 percentage points lower than a yearly peak of 51.7 recorded in July.

A reading above 50 indicates expansion, while that below 50 represents contraction. The NBS manufacturing PMI samples 3,000 enterprises of various sizes nationwide.

In terms of the size of the surveyed enterprises, the PMI of large manufacturers posted at 51.9 in October, down 0.1 percentage point from September.

That of medium enterprises stood at 49.1, down 0.9 percentage points from the previous month, and fell to a state of contraction.

The PMI of small manufacturers registered at 48.5, down 0.1 percentage point, and remained in the contraction territory, the NBS said.

Among the sub-indices of the PMI, the production index posted at 53.1, down 0.5 percentage points from September.

The index of new export orders dipped by 0.3 percentage points to 49.9 and new orders index lost 0.6 percentage points to stand at 51.6.

In addition, the index of production and business activity expectation dropped 1.9 percentage points month on month to 54.1.

“The drops in the PMI were partly caused by the week-long National Day holiday starting Oct 1,” said Chen Zhongtao, an economist with the China Logistics Information Center.

“Despite the declines, the reading remained above the expansion-contraction threshold and indicates China’s manufacturing sector was steady as the economy is entering a ‘new normal’,” said Zhao Qinghe, a senior NBS statistician.

The manufacturing activity was largely on the rise, said Zhao, citing the above-50 readings in production index, new orders index and purchase quantity index.

However, a lackluster PMI indicated that the Chinese economy is still under downward pressure, according to Zhang Liqun, a macroeconomics researcher with the Development Research Center of the State Council.

The October PMI was mainly supported by the relatively good performance of large enterprises while business activity in medium and small manufacturers showed signs of contraction.

“Therefore, we need continued efforts to further cement the foundation for the development of the manufacturing sector,” said Zhao.

CFLP Vice-President Cai Jin said surveys found that capital crunch increasingly fettered manufacturers.

“Nearly half of the polled enterprises told us that they were in shortage of money,” said Cai, adding that a lack of money led to a cut in manufacturing activity.

China’s GDP expanded 7.3 percent from a year ago in the third quarter, compared with 7.5 percent in the second quarter and 7.4 percent in the first quarter of this year.

The economy expanded at a slower pace, but it still remained within the “proper range” set by policymakers, according to the NBS.

Although the manufacturing sector may face hard time in the short term, Zhang said a string of pro-growth measures released in the third quarter are kicking in.

“There will not be a trend decline in the manufacturing PMI,” forecasted Zhang.