Key Points
- China’s factory activity shrank for the sixth consecutive month in September.
- The official PMI was 49.8, still below the 50-point mark for growth.
- The slump is being caused by weak domestic demand and ongoing trade tensions with the U.S.
- Companies are being forced to cut prices to compete, which is hurting their profits.
China’s factory activity shrank for the sixth month in a row in September, the longest slump since 2019, according to an official government report. The data paints a picture of a struggling manufacturing sector, bogged down by weak domestic demand and ongoing trade tensions with the United States.
The official manufacturing Purchasing Managers’ Index (PMI) came in at 49.8. While that’s a slight improvement from August, it’s still below the 50-point mark that separates contraction from growth. A separate private survey was more optimistic, showing a reading of 51.2, but the overall picture is one of an economy that is still sputtering.
One analyst described the Chinese economy as “a car with one cylinder firing while another misfires.” Companies are moving more goods, but they’re being forced to slash prices to compete, which is hurting their profit margins. “They’re being forced to do it at thinner margins, like street vendors selling more bowls of noodles at half price just to keep the crowd coming,” said Stephen Innes of SPI Asset Management.
China’s economy has been in a slump for a while now, weighed down by a major decline in the property market, high unemployment, and weak consumer spending.
There’s some hope that a recent tariff truce with the U.S., which was just extended to November, and an upcoming meeting between President Trump and President Xi Jinping could help improve the situation. However, the recovery remains fragile for now.
