China’s Manufacturing Purchasing Manager Index (PMI) fell 0.4 percentage points in October to 49.2—any number below 50 represents a contraction in manufacturing production—according to official figures from the National Bureau of Statistics. The data was worse than expected with market analysts expecting a figure of 49.7. This is the second consecutive month the index has indicated a contraction, and is the lowest the index has been since the onset of the pandemic.
Perhaps more worryingly, the data shows signs of stagflation—slow economic growth coupled with accelerating inflation. Driven by increases in commodity prices, the sub-index for output prices rose to 61.1, its highest level since 2016. But at the same time, a lack of demand is driving the contraction in production. The combination of high inflation and weak consumer demand could create a vicious negative feedback loop.
“About one-third of the surveyed companies listed insufficient demand as their biggest difficulty, indicating inadequate demand had restricted their production,” said Zhang Liqun, an analyst at the China Logistics Information Center, told Reuters.
But this is only the most recent data point in a series of negative economic news coming out of China. The world’s second-largest economy is unambiguously stuttering, leaving the authorities stuck in a bind as they attempt to navigate long-term goals with short-term needs.
Broader Economic Decline..........To Read More...
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