The factories sector in China is barely growing in October and export orders continue to fall: the Caixin PMI

BEIJING (Reuters) – A private survey revealed that China's manufacturing sector had barely made progress last month after losing ground. A prolonged contraction in export orders has highlighted growing pressure on the economy following the intensification of a trade war with the United States.

The Caixin / Markit Manufacturing Purchasing Managers Index for October, released on Thursday, edged up from 50.0 in September to 50.1. Economists polled by Reuters were banking on a reading of 49.9, just above the 50 mark that divides expansion and contraction.

The rather weak growth last month was in line with an official PMI survey released on Wednesday, which showed China's manufacturing sector was growing at the slowest pace in more than two years.

The fragility of the large factory sector, the main driver of growth at the national and global levels, corroborates expectations of additional support from Beijing to stimulate economic recovery, as it attempts to 39 prevent a sharp slowdown in the economy. Sino-US trade and conflict-related risks for the Chinese and global economies have recently shaken financial markets.

The Caixin study showed that factory production fell for the second month in a row and was only marginally above the neutral level of 50.0, while demand was lower at home and abroad . This has reduced business confidence among manufacturers to its lowest level in 11 months.

"The Chinese economy has not seen any obvious improvement," said Zhengsheng Zhong, director of macroeconomic analysis of the CEBM group, in a note accompanying the survey.

"The expansion in the manufacturing sector was still weak. Production and business confidence continued to cool despite stable demand. The pressure on production costs has not subsided. "

While new export orders – an indicator of future activity – improved to 48.8 vs. 47.6 in September, they remained in contraction for the seventh consecutive month, when that the trade war with the United States was intensifying.

October is the first full month after the entry into force of the latest US tariffs.

Washington and Beijing imposed additional tariffs on their respective products on September 24, and US President Donald Trump threatened to hit China with more rights.

External pressure is already starting to weigh on activity in the main areas of the Chinese economy, which has experienced the strongest growth since the global financial crisis of the third quarter. Analysts say economic conditions will deteriorate before improving.

The sub-index of all new orders – domestic and foreign – increased slightly from 50.1 in September to 50.4.

The survey also showed that input price pressures remained high for Chinese manufacturers, due in part to rising raw material costs such as steel. This could put additional pressure on profit margins and risk creating a vicious circle of lower business investment, job losses and a worsening of the gloom for the whole of the company. 39; economy.

The Chinese manufacturing sector has been constrained by the reduction of credit sources following the multi-year repression of corporate debt and risky credit practices in Beijing, with small businesses being particularly challenged.

Policymakers have taken a number of steps to reduce the risks to growth, including injecting more cash, reducing financing costs, cutting taxes and fees, and promising more support for private companies.

With rising costs and weak demand, Chinese manufacturers have been downsizing for about five years.

The aerospace research and manufacturing sector remained the weakest sector in the third quarter, according to a report on the employment index jointly published by the China Institute for Employment Research and the main platform for Zhaopin Chinese career form.

"The trade, import and export sector continued to fall in the third quarter of 2018, reflecting the continued influence of the trade war between the United States and China," the report said.

But the rate of payroll reduction in the manufacturing sector has slowed since September, according to the Caixin study, which focuses more on small and medium enterprises that are vital for job creation in China.

The Chinese authorities are committed to preventing significant job losses.