Chinese factory slowdown may have bottomed out in October

Ben Southwood
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THE manufacturing slowdown in China could have bottomed out in October, business survey data from Markit suggested yesterday, but the sector is still in the doldrums.

China’s manufacturing purchasing managers’ index (PMI) – a prominent business survey correlated with GDP – climbed to 49.1 in October, from 47.9 in September, reaching its highest level for three months. But this value remains below 50, meaning that the sector still declined slowly in the last month.

The sub-indices for output and new orders echoed this picture of slower decline, but work backlogs and employment defied the general trend by slipping into faster contraction.

“[China’s PMI] continues to recover for the second month,” said Hongbin Qu at HSBC, “In part thanks to a gradual improvement in the new orders index which picked up to a six-month high – albeit marginally below 50.”

“This is helped by the filtering through of earlier easing measures,” Qu added, “However external challenges still abound and the pressures on the job market are lingering.” Qu went on to call for further easing policy to boost the economy.

Premier Wen Jiabao expressed optimism about the chances of a return to economic growth in GDP data released tomorrow.