China's official manufacturing purchasing managers' index fell to 49.3 in October from 50.1 in September, according to the National Bureau of Statistics. This reading missed economists' median forecast of 50.0 in a Bloomberg survey, with a reading above 50 indicating expansion. The deterioration marks the lowest reading since July and suggests the world's second-largest economy has lost some traction at the start of the fourth quarter, following a modest rebound in the prior three months. As per the Service Industry Survey Center, the October decline was mainly affected by factors including the early release of some demand ahead of the National Day holiday and the complex and volatile international environment.
All three major economic indicators fell below the boom-or-bust line in October 2026, marking one of the weaker months for business activity this year. The non-manufacturing measure of activity in construction and services came in at 49.7, versus 50.2 in September, as reported by the National Bureau of Statistics. The weakness extended across both supply and demand, with the manufacturing production index falling 1.9 percentage points to 49.8 and the new-orders gauge dropping 1.1 percentage points to 49.4. Large manufacturers remained in expansion at 50.2, while medium-sized and small firms fell to 48.4 and 47.5 respectively. The composite PMI output index also fell to 49.7, down 1.0 percentage point from the previous month.
The latest data reveals concerning trends in export performance and employment conditions. Export orders slipped into contraction at 48.7 compared to 50.0 in September, while new orders declined to 49.4 from 50.5, marking the first decline in three months. Employment continued to shrink at 48.4, unchanged from the previous month, indicating persistent labor market weakness. However, delivery times remained relatively stable at 50.2 versus 50.1, suggesting supply chain conditions have not deteriorated significantly. The business confidence index dipped to a seven-month low of 53.4 from 53.8, reflecting growing pessimism among manufacturers about future prospects.
The construction sector showed particularly weak performance, with the business activity index at 48.0, down 2.3 percentage points from the previous month, as construction activity slowed on a month-on-month basis. The construction new orders index was 40.0, down 5.7 percentage points from the previous month, while the employment index was 42.0, down 2.3 percentage points. However, the service sector business activity index was 50.0%, sitting exactly at the critical threshold, down 0.2 percentage points from the previous month. Business activity indices for industries related to National Day holiday travel and consumption, including railway transport, accommodation, and culture, sports and entertainment, rebounded notably and all stood in expansion territory.
On the price front, input cost inflation eased significantly to 56.8 in October from 60.8 in September, while output price growth also moderated to 51.7 from 54.0. This suggests that manufacturers are experiencing some relief from cost pressures, though pricing power remains constrained. The easing of both input and output price pressures indicates that inflationary pressures are beginning to moderate across the manufacturing sector, which could provide some support for overall economic conditions going forward.
