Chinese Yuan: Case for policy support reinforced by weak PMIs – Commerzbank

China’s October manufacturing, non-manufacturing and composite PMI readings all fell into contraction territory, pointing to broad-based weakness, according to Commerzbank’s Charlie Lay and Dr. Henry Hao. With domestic consumption remaining subdued and export orders weakening, the disappointing data strengthen the argument for additional policy support. A meaningful fourth-quarter rebound is needed to support the government's full-year growth target.

China’s weak PMIs strengthen calls for further policy support

"China’s economic activity lost ground in October, with all three official PMI gauges falling into contraction territory simultaneously. The manufacturing PMI dropped to 49.3 (Bloomberg consensus: 49.9) vs 50.1 in September, reversing the prior month’s brief return to expansion."

"The non-manufacturing PMI fell to 49.7 (Bloomberg consensus: 50.0) vs 50.2 previously, while the composite PMI slid to 49.7 from 50.7. The breadth of the miss, spanning both the goods and services sectors, signals a fragile recovery heading into the final quarter of the year."

"The across-the-board PMI miss reinforces the case for further policy support before year-end. With Q3 GDP at 4.5% yoy, the government’s full-year growth target remains within reach but requires a meaningful Q4 rebound."

"The weakness in new export orders adds complexity to the outlook, as policymakers cannot rely on external demand to compensate for still-subdued domestic consumption."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)