The Zhitong Finance App learned that CICC released a research report saying that the CICC manufacturing PMI fell 0.8 percentage points month-on-month to 49.3% in October, lower than market expectations; the non-manufacturing business activity index fell 0.5 percentage points month-on-month to 49.7% in October; and the composite PMI fell 1.0 percentage point month-on-month to 49.7%, all of which weighed the contraction range. The decline in manufacturing PMI was mainly affected by seasonal factors, but the decline exceeded the average for the same period of the past five years, reflecting marginal weakening of demand.
CICC's main views are as follows:
In October, China's manufacturing PMI fell 0.8 percentage points month-on-month to 49.3%, lower than market expectations (median forecast of 50.0% by Reuters); in October, the non-manufacturing business activity index fell 0.5 percentage points month-on-month to 49.7%; the composite PMI fell 1.0 percentage point month-on-month to 49.7%, all of which weighed the recovery contraction range. The decline in manufacturing PMI was mainly affected by seasonal factors, but the decline exceeded the average for the same period of the past five years, reflecting marginal weakening of demand. The division of the industry continued, and price increases slowed month-on-month. There was marginal infrastructure support, but the construction industry as a whole declined. Holiday travel spending supports the service industry, but the financial sector's boom has declined. We believe that the implementation of fiscal policies has been accelerated recently, local government debt balance limits have been arranged and used, and 800 billion yuan of new policy financial instruments have been launched, forming marginal support for infrastructure. However, the construction industry as a whole is still weak. Follow-up policies may focus on speeding up the connection between capital and projects to promote capital to form a physical workload as soon as possible.
The seasonal decline was the main factor, further hampered by weakening demand. The main reason for the month-on-month increase in PMI in September 2026 is that some companies concentrated production scheduling and delivery at the end of the quarter. As the end-of-quarter effect subsided, the PMI fell 0.8 percentage points month-on-month in October 2026. Seasonally, the average PMI fell 0.5 percentage points month-on-month in October in the past five years, and the month-on-month decline in October 2026 was more than the seasonal average. In addition to seasonality, we believe that marginal weakening demand put further pressure on the October PMI. New orders and production segments fell 1.1 and 1.9 percentage points month-on-month to 49.4% and 49.8%, respectively. Although the month-on-month decline in new orders was less than production, on the one hand, the absolute level of demand segments was lower than production, indicating that demand contracted even more in October. New export orders fell 1.3 percentage points month-on-month to 48.7%, in line with the fall in initial manufacturing PMI values in Japan and the Eurozone in October. On the other hand, in-hand orders in October fell 1.9 percentage points month-on-month to 44.1%, and inventory levels were also weak. Inventories of finished products and raw materials were 47.5% and 48.4% respectively (47.6% and 48.4% in September, respectively).
The division of the industry continues. Although the PMI of all major industries has declined, in absolute terms, the high technology and equipment manufacturing PMI were 51.3% and 50.6% respectively (52.5% and 51.0% in September, respectively), which is still in the expansion range; while the PMI for the consumer goods and high energy consumption industries was 48.8% and 47.3%, respectively (50.7% and 48.0% in September, respectively). Industry differentiation is consistent with overall demand structure differentiation. First, external demand is relatively stronger than domestic demand, and second, equipment investment is relatively stronger than investment in construction and security. By enterprise size, PMI for large, medium, and small enterprises all declined in October, but in absolute terms, large enterprises are still better than small and medium-sized enterprises. The three PMIs were 50.2%, 48.4%, and 47.5%, respectively (50.6%, 49.7%, and 48.9% in September, respectively).
Price increases have slowed month-on-month. Although the Middle East conflict in October drove crude oil prices to rise further, prices of other commodities generally declined, so overall, the increase in manufacturing prices slowed month-on-month. In October, the purchase price of raw materials and the factory price fell 4.0 and 2.3 percentage points month-on-month to 56.8% and 51.7%, respectively. The trend of upstream prices squeezing downstream profit margins continues due to demand.
There was marginal infrastructure support, but the construction industry as a whole declined. In October, the index of business activity in the construction industry fell 2.3 percentage points month-on-month to 48.0%, recovering the contraction range. The implementation of fiscal policies has been accelerated, and the launch of new policy financial instruments in 2026 [1] has brought marginal support to infrastructure. The China Logistics Information Center [2] said: “The civil engineering and construction industry is relatively stable. The index of business activity is up from last month, but it is still below 50%.” As a result, other construction industries, such as real estate, are dragging down or increasing the overall construction industry.
Holiday travel spending supports the service industry, but the financial sector's boom has declined. The index of business activity in the service sector fell 0.2 percentage points month-on-month to 50.0% in October, and the absolute value is still weak in the same period in history. From an industry perspective, the service industry is mainly supported by holiday travel consumption. The Bureau of Statistics [3] said, “Indices of business activity in the railway transportation, lodging, culture, sports and entertainment industries related to travel consumption during the '11th' holiday have clearly rebounded, and they are all in the expansion range, and market activity has increased.” However, due in part to financial market fluctuations, financial industry sentiment declined. The Bureau of Statistics said, “The index of business activity in the financial sector alone declined and increased significantly. This is also the main reason for the slight decline in service sector sentiment this month.”