The power shortages, higher prices for commodities and especially energy, and cuts to production forced on businesses to lower carbon emissions took their toll on the Chinese economy last month pushing activity across the huge manufacturing sector a little deeper into contraction.
In fact, October saw China’s factory contracted for a second month in a weak start to the final quarter of 2021 after activity in the three months to September barely grew.
The official survey of manufacturing activity fell to a reading of 49.2 in October, down from 49.6 in September, according to the National Bureau of Statistics (NBS) on Sunday
The 50-point mark separates growth from contraction. Analysts had expected it to come in at 49.7.
In line with the softer level of activity, a subindex measuring production slipped to 48.4 in October from 49.5 in September as output of steel, cars, cement, aluminium and other products dipped.
Coal output rose thanks to official encouragement to build power station stocks ahead of the approaching winter.
A subindex in the survey for new orders also contracted for a third month, coming in at 48.8.
On top of this, the subindex for output prices jumped to 61.1, the highest since 2016 when the statistics bureau started publishing the indicator, suggesting no letup in the pressures that pushed producer prices up at record 10.7% annual rate in September.
The official non-manufacturing index eased slightly to 52.4 from 53.2 in September, when services swung back to expansionary at the end of a COVID-fraught summer.
New clusters of COVID-19 returned in mid to late October, especially in the north, which threatens to again disrupt economic activity because of the tough government ordered restrictions to contain the virus.
“Due to the impact of the epidemic and weather, consumers were more inclined to spend their holidays at home or travel for short distances,” Zhao Qinghe, a senior NBS statistician, said in an accompanying statement.
While the transport sector including air and railway services expanded, the growth was relatively weak, Zhao said.
China’s official October composite PMI, which includes both manufacturing and services activity, stood at 50.8, down sharply from September’s 51.7 and indicating the economy is still weakening.
This helps explain why President Xi Jinping did not go to the G-20 summit in Rome at the weekend nor the Cop 26 climate conference that started in Glasgow on Sunday.
With the economy weak, blackouts and power rationing threatening and Covid hovering, even the ‘President for Life’ can’t risk being absent ahead of the annual Communist Party end of year conference this month (which sets economic and other plans for the new year) and the all-important 20th people’s congress next year where he wants to be elected to a third term.
