Chinese manufacturing has contracted for the third month in a row, according to the official monthly factory survey that mainly reflects the activities of state-owned enterprises (SOEs) while a survey of private sector companies shows that operating conditions faced by Chinese goods producers continued to deteriorate in October, even though at the weakest rate in four months. Elsewhere in Asia, activity  rose in Japan; it was close to stagnation in India and it fell in South Korea and Indonesia.


The official Chinese Purchasing Managers' Index (PMI) showed a reading of 49.8 for October, unchanged from last month. A figure below 50 indicates that factory activity contracted.

The most recent growth GDP (gross domestic product) figures showed the country's economy growing at a rate of 6.9%, the weakest rate since the financial crisis.

Total new private sector business declined only modestly, helped in part by a renewed increased in new export orders. This in turn contributed to softer contractions of output and employment in October. Meanwhile, purchasing activity and inventories of inputs continued to fall amid reports of lower production requirements. Widespread evidence of reduced raw material costs led to a further marked decline in cost burdens, which in turn were passed onto clients in the form of lower selling prices.

Adjusted for seasonal factors, the Caixin China General Manufacturing PMI — a composite indicator designed to provide a single-figure snapshot of operating conditions in the manufacturing economy —  posted 48.3 in October, up from 47.2 in September.

Operating conditions have now worsened in each of the past eight months, though the latest deterioration was the weakest since June. Total new business placed at Chinese goods producers declined for the fourth month in a row in October. That said, the rate contraction eased since September’s recent record and was only modest. Softer domestic demand appeared to be a key factor weighing on overall new work as new export business increased for the first time since June, albeit marginally.

Nonetheless, according to Markit, the compiler of the survey, a further decline in overall new orders led firms to cut their production schedules again in October. However, the rate of reduction also eased since September and was moderate overall.

Manufacturing employment declined in October, thereby extending the current sequence of job shedding to two years. That said, the rate of reduction was the weakest seen in three months. Anecdotal evidence suggested that some companies cut their payroll numbers as a result of company down-sizing policies and the non-replacement of voluntary leavers. Lower staffing levels and reduced output contributed to the sixth successive monthly increase in unfinished business. However, the rate of backlog accumulation remained marginal overall. As has been the case since July, Chinese manufacturers cut back on their purchasing activity in October.

China manufacturing PMIMarkit says panellists overwhelmingly linked lower input costs to reduced prices for a broad range of raw materials, with metals mentioned in particular. As part of efforts to boost customer demand, companies generally passed on their savings in the form of lower selling prices. Moreover, the pace of discounting remained solid overall.

The headline PMI posted at 52.4, up from 51.0 in September, indicating a marked improvement in operating conditions at Japanese manufacturers. The latest reading was the highest recorded since October 2014, which reflected faster rates of expansion in production and new orders and a return to growth in both employment and stock building.

The headline PMI posted at 49.1, down slightly from 49.2 in September, indicating a marginal rate of contraction in operating conditions at South Korean manufacturers. The latest reading was higher than the average over the current eight month period of figures below the 50.0 no-change mark.

The seasonally adjusted Nikkei Indonesia Manufacturing PMI was at 47.8 in October, pointing to a thirteenth consecutive monthly deterioration in operating conditions across the country. The index was up from 47.4 in September, however, reflecting softer declines in employment, stocks of purchases and a sharper lengthening of suppliers’ delivery times.

Posting a 22-month low of 50.7 in October (September: 51.2), the seasonally adjusted Nikkei India Manufacturing PMI was indicative of a weaker improvement in business conditions across the sector. Nonetheless, the PMI has recorded above the crucial 50.0 threshold in each month since November 2013. Output growth eased in October on the back of a slower increase in new orders. Rates of expansion in both production and order books were the weakest in their current 24-month sequences of growth, with panellists reporting challenging economic conditions and a reluctance among clients to commit to new projects.

Pic on top: According to GE Healthcare, in this quarter biologics manufacturer JHL Biotech will begin to take delivery of the largest single-use modular biopharmaceutical manufacturing facility in the world. It’s being constructed in Germany and shipped to Wuhan, the capital of China’s Hubei province.