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China’s factory and services activity contracted in October, with signs that things could worsen in the coming months as the government sticks to Covid controls that have disrupted activity across the world’s second-largest economy.
Both the official manufacturing purchasing managers index and the non-manufacturing gauge, which measures construction and services activity, fell in the month to 49.2 and 48.7, respectively, missing economists’ expectations. A reading below 50 indicates contraction in activity, while anything above suggests expansion.
“Today’s data suggest it is too early to bet on China’s economic recovery” despite recent third-quarter economic data performing better than expected, said Raymond Yeung, chief economist for Greater China at Australia & New Zealand Banking Group Ltd. “Rising Covid, lackluster property and falling exports are dragging China’s growth momentum.”
Chinese stocks flipped into gains after earlier losses Monday. The benchmark CSI 300 Index was up 0.2% as of 11:15 a.m. local time. The yield on China’s 10-year government bond fell 2 basis points to 2.64%, while the onshore yuan weakened 0.2% to 7.261 per dollar.
Even though recent data showed economic growth strengthened to 3.9% in the third quarter, there have been signals of weakness again as Covid outbreaks worsen, creating more disruptions for businesses and residents. Sunday marked the biggest nationwide surge in infections since August as cases topped 2,600, and workers at Apple Inc.
