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China's factory activity set to stall in October- Reuters poll

Economy Oct 28, 2022 01:31AM ET
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© Reuters. FILE PHOTO: An employee works on the production line at a filter press factory in Dezhou, Shandong province, China August 25, 2022. REUTERS/Siyi Liu/File Photo

BEIJING (Reuters) - China's factory activity likely showed no growth in October, with production hit by COVID-19 restrictions and as exports moderate on slowing global demand, a Reuters poll showed on Friday.

The official manufacturing Purchasing Manager's Index (PMI) was forecast at 50.0 in October, a touch lower than 50.1 in September, according to the median forecast of economists polled by Reuters.

The 50-point mark separates contraction from growth.

Though many countries have eased pandemic curbs, the world's second-largest economy has continued to fight its spread with lockdowns, mass testing and quarantines, which has hit economic growth and caused significant disruption to businesses. Signs of weakening global demand are also weighing more heavily on export-oriented manufacturers.

Optimism among U.S. businesses in China has hit record low levels, an annual survey showed on Friday, as competitive, economic, and regulatory challenges compound the stresses from the ongoing zero-COVID policies

On Thursday, data showed profits at China's industrial firms shrank at a faster pace in January-September.

Economists do not expect COVID-19 measures to ease anytime soon after the Communist Party Congress concluded over the weekend and China's new leadership team raised fears that containing COVID-19 will take precedence over economic growth.

"In terms of zero-COVID, the signals, coming out from the congress, suggest that it will still be here to stay for some time. And we think any meaningful shift away from that will only happen in 2024," said Sheana Yue, China economist at Capital Economics.

Chinese cities from Wuhan in central China to Xining in the northwest are doubling down on COVID-19 curbs, sealing up buildings, locking down districts and throwing millions into distress.

China's economy expanded at a faster than expected clip in the September quarter, but export growth slowed and the key property sector further cooled, pointing to a fraught recovery.

"China's struggling growth trajectory is not just about COVID-related restrictions," said analysts at Oxford Economics in a research note.

"The economy is facing significant structural headwinds that will limit GDP growth. We forecast China's growth will average about 4%-4.5% over the next five years or so."

The official manufacturing PMI, which largely focuses on big and state-owned firms, and its survey for the services sector, will be released on Monday.

The private sector Caixin manufacturing PMI, which centres more on small firms and coastal regions, will be published on Tuesday. Analysts expect a headline reading of 49.0 from 48.1 in August.

(Polling by Veronica Khongwir; Reporting by Liangping Gao and Ryan Woo; Editing by Jacqueline Wong)

China's factory activity set to stall in October- Reuters poll
 

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