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Elliot Clarke, Research Analyst at Westpac, notes that China’s official PMIs continued to soften in October, the services index falling to its lowest level since August 2017, the manufacturing index to its weakest read since July 2016.

Key Quotes

“Somewhat surprisingly given its focus on smaller firms, the Caixin manufacturing survey was broadly unchanged.”

“Most prominent in the PMI detail remains the downtrend in new export orders. For manufacturing, the NBS survey reports new export orders are currently 4.3ppts below average. This level was last seen in late-2015/early-2016, and before that mid-2012. Caixin similarly points to sub-par external demand.”

“Domestic demand remains an offsetting positive for Chinese manufacturing. From the NBS survey, total new orders are currently only 2.8ppts below average compared to external orders’ -4.3ppts.”

“The key risk for the period ahead is then that the softening of employment reported by the PMI’s spreads and weighs on consumer activity at an inopportune time.”