Regions

China factory output again slips, but fall slows down in October

November 3
8:25 PM 2015

Indicating the prolonged sluggishness in the economy, China's factory activity dropped further again in October.

However, the marginal recovery in export orders has slowed down the drop in the manufacturing production. The PMI edged up in the previous month.

The marginal recovery is giving hopes that Chinese industry is bottoming out after the long slump that impacted not only the domestic economy, but also global markets.

With October output, China's manufacturing production dropped for the eight months in a row.

The Caixin/Markit China Manufacturing Purchasing Managers' Index (PMI) edged up to 48.3 in October from 47.2 in September, the lowest since March 2009. Though PMI is still below the 50-mark, the October numbers are considered to be positive since June 2015, say economists.

Considering surveys on factory and services sectors, business conditions are still cooling down, but in a gradual manner rather than steep drop.

The new export orders rose for the first time since June. The sub-index grew to 50.7 from 44.6 in September. He Fan, Chief Economist at Caixin Insight Group, said, "The slight upswing shows the manufacturing industry's overall weakening has slowed down, indicating that previous stimulus measures have begun to take effect."

Economists consider the latest PMI readings indicate some momentum in the manufacturing industry as it was helped mostly by overseas demand. The services sector growth is at a reasonable level.

The new export order component rose to 50.7 indicating its highest level for the 10 months. The nationwide manufacturing activity in small and medium-sized companies is not covered in the official data. 

Though the China's official manufacturing PMI remained in contraction in October, but it's stabilizing to some extent. The fiscal policy and easing monetary measures are likely to help the economy rebound in the fourth quarter of 2015 and the first quarter of 2016 predict some economists.

The latest October numbers indicate continuous fall in Chinese factory output for eighth consecutive month.

The manufacturing industry slashed jobs for 24 months continuously owing to weakening sales volume. The rate of reduction is also weakened during the past three months.

The Chinese government has been extending a series of support measures for the last one year to check the slowdown in the economy.

The government has cut interest rates six times since last November. However, these measures will show the results in a longer period. Economists are still wary about the future outlook on the world's second largest economy.

However, economists are still clueless over the certainty of recovery in China's economy in the fourth quarter of 2015. PMI is below 50-level and slowdown of fall in factory output in October are giving mixed results about the world's second largest economy.

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