Chinese manufacturing shrunk for third consecutive month

Manufacturing sector growth slowed to nearly a two-year low in October despite the month being a festival season, showed the widely-tracked Nikkei Purchasing Managers’ Index (PMI).

“For electronics, there should be a few seasonal month-on-month pick-up towards the year-end”, said Credit Suisse economist Michael Wan, but he noted that lead indicators show that the pick-up will be subdued.

New orders quickened to a three month high, with this progress at least partly credited to ongoing substantial growth in new exports.

The official purchasing managers index was unchanged at 49.8 in October, the National Bureau of Statistics said Sunday, compared with the median estimate of 50 in a Bloomberg survey.

The UK’s manufacturing sector had its best month for more than a year in October, a survey suggests.

The Caxin-Markit China manufacturing PMI gauge rose to 48.3 from 47.2 in September, well above the 47.5 level that had been expected by the markets. It is imperative to state that a reading above 50 is indicative of an expansion in the sector.

Factories reported a renewed increase in new export orders, which in turn helped soften the contractions in employment and output, resulting in the index’s slowest rate of decline in four months, Caixin said Monday. The new sales orders index declined to 50.5 in October.

The prices of industrial metals such as copper and iron ore, a key component in steel-making, have also been hit by slowing growth in China as demand for raw materials cools in the world’s second- largest economy. This year alone the government has cut interest rates five times.

Average input costs and producers’ selling prices continued to fall sharply in October.

China’s economy grew 6.9% between July and September from a year earlier, dipping below 7% for the first time since the global financial crisis, though a few market watchers believe real growth levels are much lower than official data suggest.