China - October PMIs point to improving momentum
China Macro: Both manufacturing PMIs back in expansion territory. Caixin's services PMI comes in stronger than expected.
China Macro: Both manufacturing PMIs back in expansion territory
The October PMIs for China published at the end of last week and today show that the Chinese economy is gaining some momentum at the start of Q4, in line with our growth forecasts. To start with the manufacturing side, it was the first time since April 2024 that China’s two manufacturing PMIs were both in expansion territory again. The official one published by NBS had already improved quite a bit in September (rising to 49.8, from an eight-month low of 49.1 in August), but picked up further in October to 50.1 (consensus: 49.9). Caixin’s equivalent had been quite volatile in recent months. This index fell by more than a full point to 49.3 in September, but gained back almost all of this in October – rising to 50.3 (consensus: 49.7). Looking at the PMI’s subcomponents, the improvement was broad-based. In both surveys, the output and new orders components showed an improvement, although the supply side (output) remains clearly stronger than the demand side (new orders). Meanwhile, the new export orders components in both surveys remain relatively weak – pointing to external demand risks – although Caixin’s export sub-index improved substantially but remained below the neutral mark.
Caixin’s services PMI comes in stronger than expected
On the services side, Caixin’s services PMI published this morning was much stronger than expected, rising by almost two full points to 52.0 (September: 50.3, consensus: 50.5). Last Thursday, the official non-manufacturing PMI came in a bit higher at 50.2 (September: 50.0, consensus: 50.3). The construction subindex of the official non-manufacturing PMI is still at a relatively weak level (a post-pandemic low of 50.4). All in all, Caixin’s composite PMI (a weighted average of the output components in the manufacturing and non-manufacturing surveys) rose back to a four-month high of 51.9 (September: 50.3). The official composite PMI also picked up, although more modestly, reaching a five month high of 50.5 (September: 50.4).
Both composite PMIs suggest the Chinese economy is gaining some momentum as we have moved into the final quarter of the year. This is in line with our forecast that quarterly growth will pick up in Q4, reflecting a stepping up of stimulus since late September and also some payback from weakness in previous quarters. We will review our growth forecasts for 2024 (4.9%) and – in particular – 2025 (4.5%) later this month, when we will know more about the scale and timing of additional fiscal stimulus (with the NPC Standing Committee meeting this week) and the outcome of the US presidential elections held today. For more background, also see the China coverage in our October Global Monthly, .