China’s massive manufacturing sector improves in October

China’s manufacturing sector showed signs of improvement in October, as the Caixin China Purchasing Manager’s Index rose to 48.3 in October, up from 47.2 in September.

The reading is closer to the 50-point level that separates growth from contraction than it was in September, indicating that the industry shrank again in October, but less so than a month earlier. This is the eighth straight month that manufacturing industry fell short of 50.

Sub-indexes of the manufacturing PMI showed total new business fell only modestly because export orders were stronger in October. This softened the blow for the labor market, but manufacturers continued to shed workers for the 24th consecutive month.

Manufacturers continued to cut back on purchasing, while input costs and output prices fell at considerable rates, reflecting increasing worries about deflation.

The slight improvement in the PMI “shows the manufacturing industry’s overall weakening has slowed, indicating that previous stimulus measures have begun to take effect,” said Dr. He Fan, chief economist and director of research at Caixin Insight Group. “Weak aggregate demand remained the biggest obstacle to economic growth, and the risk of deflation resulting from the continued fall in the prices of bulk commodities needs attention.”