Manufacturing activity in China increases as slowest pace since June

An independent measure of manufacturing activity showed improvement in operating conditions across China in October, but at the slowest pace since June.

The Caixin-Markit China manufacturing purchasing manager index (PMI) showed that China's enforcement of environmental policies, aimed at lowering pollution from large production plants, contributed to a sharp rise in input costs and weighed on performance.

Caixin China PMI

The manufacturing PMI for October held steady at September's reading of 51 points. Any reading above 50 indicates growth.

New orders rose at a slightly quicker pace, while production increased at the slowest rate for four months, the report said, while new export sales also rose at a modest pace following a marginal upturn in September.

Employment, however, fell as firms lowered workforce numbers to boost efficiency.

Production output

Production, however, increased only marginally in October, with the rate of growth the weakest in four months.

Meanwhile, the 12-month outlook for production output slowed to its second lowest level in 15 months.

Stocks of finished goods held by Chinese manufacturers declined slightly in October.

Reaction

Dr. Zhengsheng Zhong, director of macroeconomic analysis at CEBM Group said: "The stringent production curbs imposed by the government to reduce pollution and relatively low inventory levels have added to cost pressures on companies in midstream and downstream industries, which could have a negative impact on production in the coming months.”

There was little market reaction in mainland China, with the Shanghai Composite gaining just 0.08% to 3,396.07. The Hang Seng index in Hong Kong gained 1.2% to 28,592.