China's October factory growth unexpectedly hits five-month low: official PMI

Sat Nov 1, 2014 12:31am EDT
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BEIJING (Reuters) - China's factory activity unexpectedly fell to a five-month low in October as firms fought slowing orders and rising costs in the cooling economy, reinforcing views that the country's growth outlook is hazy at best.

The official Purchasing Managers' Index (PMI) eased to 50.8 in October from September's 51.1, the National Bureau of Statistics said on Saturday, but above the 50-point level that separates growth from contraction on a monthly basis.

Analysts polled by Reuters had forecast a reading of 51.2.

Underscoring the challenges facing the world's second-largest economy, the PMI showed foreign and domestic demand slipped to five- and six-month lows, respectively, with overseas orders shrinking slightly on a monthly basis.

"There remains downward pressure on the economy, and monetary policy will remain easy," economists at China International Capital Corp said in a note to clients after the data.

Noting that inventory levels of unsold goods rose last month even as factories cut output levels and drew down on stocks of raw materials, the investment bank argued that the economy still faced tepid demand.

It has been a tough year for China's economy. Growth fell to 7.3 percent in the third quarter, its lowest level since the 2008/09 global financial crisis, as the housing market sagged and domestic demand and investment flagged.

The cooldown, expected to be China's worst in 24 years this year according to a Reuters poll, came despite a flurry of government support measures.

Saturday's PMI suggested no imminent recovery in demand.   Continued...

An employee works at the production line of an automobile factory in Dalian, Liaoning province, October 18, 2014. REUTERS/Stringer