CHINA's economy has shown signs of weakness in October as power shortages and surging commodity prices weighed slowed manufacturing, while Covid controls retarded holiday spending, Bloomberg reports.
The official manufacturing purchasing managers' index fell to 49.2, the National Bureau of Statistics, the second month it was below the key 50-mark that signals a contraction in production. The non-manufacturing gauge, which measures activity in the construction and services sectors, dropped to 52.4, below the consensus forecast.
The PMIs show the economy is under pressure from both the supply and demand side. Manufacturers are struggling with electricity shortages and rising costs, while consumer spending remains weak as the government's Covid-zero approach means a tightening of restrictions around travel and social gatherings to contain frequent flare-ups of virus cases.
"Looking forward to November, the non-manufacturing PMI could drop significantly on the new wave of Covid-19 and China's increasingly harsh zero-Covid policy, while the manufacturing PMI could remain weak due to shocks from both the supply and demand sides," said Ting Lu, chief China economist at Nomura Holdings in a note.
Another worrying sign in the data was the pick-up in inflationary pressure in October. Both input and output prices for manufacturers jumped, suggesting producers are passing on higher costs to customers. Producer-price inflation is already at its highest level in almost 26 years.
"The jump of output price index in October is alarming," said Zhang Zhiwei, chief economist at Pinpoint Asset Management in a note. "This could lead to higher pressure on CPI inflation, and limit the space of monetary policy easing."
In a separate report Monday, the Caixin manufacturing purchasing managers' index - a private survey that tracks smaller, export-oriented businesses - rose to 50.6 from 50 in September, citing an improvement in domestic demand.
"Overall, we think both official and Caixin survey suggested increasing downside growth pressure in the short term," said Peiqian Liu, a China economist at Natwest Group.
Policy action should focus on "stabilising commodity prices and supplies while extending targeted support to the needed sectors", she said.
New orders fell to 48.8 from 49.3, declining for a fourth month. The sub-index for manufacturing jobs eased to 48.8 from 49; non-manufacturing employment edged down to 47.5 from 47.8 and the construction sub-index fell to 56.9 from 57.5.
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