China's Manufacturing Sector Contracts for Seventh Month, Longest Slump in Nine Years

China's manufacturing sector has remained in a contraction phase for seven consecutive months, marking the longest period of downturn in nearly nine years.

On October 31, the National Bureau of Statistics of China announced that the Purchasing Managers' Index (PMI) for October was recorded at 49.0, a decrease of 0.8 points from the previous month's 49.8.

Semiconductor manufacturing plant located in Jiangsu Province, China. Photo by AFP Yonhap News

This figure falls below the median forecasts of economists compiled by both Reuters and Bloomberg, which stood at 49.6.

The PMI, based on surveys of corporate purchasing managers, serves as an indicator of economic trends in the relevant sector. A reading above 50 indicates expansion, while a reading below 50 signals contraction.

China's manufacturing PMI has remained below 50 for seven consecutive months, from April (49.0) through October. The October figure is also the lowest in six months.

Bloomberg News explained that this represents the longest period of contraction in about nine years.

By company size, the PMI for large enterprises was 49.9, for medium-sized enterprises 48.7, and for small enterprises 47.1. These figures represent declines of 1.1 points, 0.1 points, and 1.1 points, respectively, compared to the previous month.

Among the five main sub-indices that make up the manufacturing PMI, the production index fell by 2.2 points to 49.7 compared to the previous month. The new orders index (48.8) declined by 0.9 points, the raw materials inventory index (47.3) dropped by 1.2 points, and the employment index (48.3) decreased by 0.2 points.

The non-manufacturing PMI, which includes construction and services, rose by 0.1 points to 50.1 from the previous month's 50.0, returning to an expansion phase.

The business activity index for the construction sector fell by 0.2 points to 49.1 compared to the previous month, while the business activity index for the services sector rose by 0.1 points to 50.2 over the same period.

Bloomberg News analyzed, "In addition to external risks such as tariffs, weak domestic demand is also negatively affecting the outlook for Chinese factories. While export growth this year has been surprisingly strong, questions remain about its sustainability. Now, with the leaders of the United States and China having agreed to a longer trade truce, if customers no longer feel the need to stockpile inventory in anticipation of tariff hikes, there is a possibility that overseas demand may slow."