China’s factory activity slows down in October, missing expectations, private surve shows

China’s factory activity growth in October fell short of market expectations due to a sharp decline in new export orders amid intensifying trade tensions with the United States during the month, according to an exclusive survey released on Monday.

RatingDog China General Manufacturing PMI, compiled by S&P Global It dropped to 50.6 in October It has fallen below analysts’ expectations of 50.9 in a Reuters poll, down from a six-month high of 51.2 in September.

New export orders fell at the fastest rate since May, with respondents attributing this to “increased trade uncertainty”.

The survey showed that new jobs and output grew at slower rates in October than in the previous month, and business confidence fell to its lowest level in six months. “When assessing the one-year outlook for manufacturing, firms have been the least optimistic over the last six months,” he said.

But a gauge of employment at factories rose to the highest level since August 2023, marking the first expansion since March.

Private survey figures, which remained above the 50 reference point separating growth from contraction, were better than the official survey released last Friday, which showed manufacturing activity falling to 49.0, the worst contraction in six months.

Private surveys previously conducted by Caixin and S&P Global have generally painted a better picture than official surveys in recent years because they focused more on export-oriented manufacturers.

RatingDog’s exclusive survey covers 650 manufacturers and collects responses in the second half of each month; The official PMI surveys a broader sample of more than 3,000 companies at the end of the month.

OCBC Bank Managing Director and Head of Asia Macro Research Dongming Xie said the manufacturing PMI is likely to show a moderate recovery in the coming months as business confidence stabilizes with the extension of the US-China trade truce and the expected recovery in export orders.

China and the United States reached a trade truce last week after American President Donald Trump and his Chinese counterpart Xi Jinping met in South Korea, stabilizing relations after an escalating trade war that sparked fears of a global economic crisis.

Within the scope of the agreementIn response to China pausing sweeping export controls on rare earth metals, the United States will halve fentanyl-related tariffs on Chinese goods to 10%, bringing the total rate on Chinese goods to around 47%.

The US will suspend enforcement of the 50% ownership “penetration rule” under export controls and its Section 301 investigation into China’s shipping, logistics and shipbuilding industries.

Beijing also announced that Nvidia Corp and Qualcomm Inc. It will also end antitrust and anti-dumping investigations targeting American chip companies, including The White House said on Saturday. Beijing will also continue purchases of American soybeans and other agricultural and energy products.

Goldman Sachs last week raised China’s 2025 GDP forecast, encouraged by trade detente in the United States and Beijing’s determination to boost manufacturing competitiveness and further boost exports. The Wall Street bank expects China’s real GDP growth to reach 5% this year and 4.8% in 2026, from 4.9% and 4.3% respectively.

Chinese manufacturers have been trying to diversify their export markets since the beginning of the year to rely less on the United States and more on Southeast Asian and European markets. China’s exports to the US have fallen by double digits every month since April. this year compared to the same period last year.

This decline was largely offset by increased exports to Southeast Asia. As of September, it increased by 14.7% this yearThe European Union, which grew by 8.2%, and Africa, which grew by over 28%. China’s overall exports increased by 6.1% in the first three quarters of this year, while its imports fell by 1.1%.

Despite resilient exports, the world’s second-largest economy showed new signs of tension, with growth slowing to 4.8% in the third quarter, its slowest level in a year. Fixed asset investment, which includes real estate, unexpectedly contracted by 0.5% in the first nine months of the year; This was the first such decline since 2020, when the pandemic hit.

Evercore ISI China strategist Neo Wang said in a note on Sunday that the high base in last year’s fourth quarter (5.4 percent GDP growth) following the stimulus measures taken in September will put major pressure on the growth rate for the current quarter.

The weakening impact of government consumption subsidies and the protracted housing crisis will also continue to weigh on growth next year, Wang added.