Investing.com-- Chinese manufacturing activity unexpectedly contracted in October, a private survey showed on Wednesday, pointing to broad declines in the sector after a government survey also showed a similar reading earlier this week.
The Caixin manufacturing purchasing managers index (PMI) read 49.5 in October, missing expectations of 50.8 and falling from the 50.6 seen in the prior month. A reading below 50 indicates contraction, with the Caixin PMI contracting for the first time in three months.
The weak reading was driven chiefly by softening domestic and overseas demand, while growth in new orders slowed for a second straight month. Export orders continued to decline amid worsening economic conditions in China’s biggest trading partners.
The reading comes just a day after government PMIs also showed an unexpected contraction in China’s manufacturing sector through October. But the Caixin survey differs from the government survey, in that it focuses more on smaller, private enterprises, as opposed to the bigger, state-run enterprises covered by the official survey.
Still, the two surveys signal a broad-based deterioration in Chinese manufacturing activity, with repeated stimulus efforts from Beijing providing only limited support to the sector.
A decline in overseas demand has been one of the key weights on Chinese manufacturing, as local producers slashed output in the face of declining orders.
Manufacturing activity has largely struggled this year, with the Caixin PMI now indicating a contraction for five of the 10 months so far in 2023.
The weak manufacturing readings also raised concerns over just how much China’s economy will recover this year, even as gross domestic product growth exceeded expectations in the third quarter.
“The economy has showed signs of bottoming out, but the foundation of recovery is not solid. Demand is weak, many internal and external uncertainties remain, and expectations are still relatively weak,” Wang Zhe, Senior Economist at Caixin Insight Group wrote in a note.
Zhe also noted that business sentiment remained weak, with manufacturers turning more negative over China’s economic prospects this year.