BEIJING (Reuters) – China’s manufacturing activity unexpectedly returned to contraction in October, an official factory survey showed on Tuesday, casting a cloud over recent indicators that showed a nascent recovery in the world’s second-largest economy.
The official purchasing managers’ index (PMI) fell to 49.5 in October from 50.2, dipping back below the 50-point level demarcating contraction from expansion. The reading also missed a forecast of 50.2.
Policymakers have since June unveiled a raft of measures to shore up growth, including modest interest rate cuts, increased cash injections and more aggressive fiscal stimulus.
But analysts say more policy support may be needed to ensure the economy reaches Beijing’s annual growth target of about 5%.
China’s top parliamentary body last week approved a 1 trillion yuan ($137 billion) sovereign bond issue in the fourth quarter, and passed a bill allowing local governments to front load part of their 2024 bond quotas to support investment and economic growth.
Earlier this month, the central bank injected the biggest cash support since late 2020 via short-term policy loans to allow banks to extend credit as well as keep interest rates low.
China’s economy grew at a faster-than-expected clip in the third quarter, while consumption and industrial activity last month also surprised on the upside, suggesting the recent flurry of policy measures is helping bolster a tentative recovery.
Nomura, JPMorgan and Moody’s Analytics all upgraded their 2023 growth outlook, following the rosier-than-expected Q3 data.
But a protracted property crisis has been a major drag on the economy, while slowing global growth has also added to the challenges for authorities trying to spur momentum.
(Reporting by Joe Cash. Editing by Sam Holmes and Shri Navaratnam)
