Anyone hoping for “green shoots” out of the world’s second-largest economy will be disappointed on Thursday.
Chinese PMI data for October came in below expectations, underscoring the notion that ostensible “progress” on trade talks with the US notwithstanding, Beijing faces serious headwinds as policymakers struggle to keep growth from falling below the Party’s target range.
The October manufacturing PMI printed 49.3, the National Bureau of Statistics said Thursday. That’s worse than the 49.8 consensus was looking for and below even the most pessimistic estimate from 33 economists (the range was 49.5 to 50.5).
This comes less than two weeks after China reported the slowest pace of growth in decades. Although the economy expanded at just a 6.0% clip last quarter, the September activity data released concurrently with the GDP numbers showed some improvement, stoking optimism that perhaps the worst was behind us.
That might have been wishful thinking. In addition to the manufacturing miss, the non-manufacturing gauge fell to 52.8 in October from 53.7 in September. That is a big miss versus consensus, which was looking for 53.6.
The composite PMI for this month printed 52, down from 53.1 last month.
This will be viewed in the context of the string of lackluster data that hit in the lead up to the GDP numbers earlier this month. Trade data for September was uninspiring as exports fell 3.2% and imports plunged 8.5%. Meanwhile, factory deflation is becoming more entrenched. Producer prices fell 1.2% in September.
All of this as policymakers have been reluctant to the throw the kitchen sink at things in terms of stimulus. Some expect a cut to the MLF rate next month, which would set up a lower loan prime rate several weeks later. The LPR was left unchanged in October.
Of course, it’s hard to countenance broad-based monetary easing when inflation continues to run hot thanks to rising food prices (think: pork).
In any event, this is yet another sign that irrespective of what happens on the trade front, the damage to the global economy has been done. There won’t be a “V-shaped” recovery.
The only question is whether several rounds of easing from central banks will finally start to manifest themselves in better outcomes, setting the stage for a sustainable (if gradual) rebound in the next six or so months.