Volkswacht Bodensee - China's factory activity contracts on Covid curbs

The Purchasing Managers' Index (PMI) -- a key gauge of manufacturing in the world's second-biggest economy -- came in at 49.2, down from September's 50.1 and below the 50-point mark separating growth from contraction, according to data from the National Bureau of Statistics (NBS).

Sporadic Covid-19 lockdowns around China have dampened demand and business confidence.

The manufacturing PMI has been in contraction territory for six out of the past eight months, as sweeping Covid restrictions paralysed major industrial cities such as Shanghai, Shenzhen and Chengdu and a summer of searing heat hit production.

"In October, affected by the frequent appearance of domestic outbreaks, China's purchasing managers' index declined," NBS senior statistician Zhao Qinghe said in a statement.

Zhao said "the foundation for China's economic recovery and development needs to be further consolidated," noting both weakened demand and rising raw material prices.

While activity at larger businesses expanded in October, work at small and medium-sized enterprises contracted significantly, with Zhao saying "the pressure on production and operation at small and medium-sized enterprises has increased."

Meanwhile the non-manufacturing PMI came in at 48.7 points in October, a sharp decline from 50.6 in September and "below a critical point," Zhao said in the statement.

Zhao said Covid outbreaks in October had hit the service industry especially hard, with activity by transport, accommodation and food and beverage businesses falling during a traditional peak period coinciding with week-long national holidays.

Chinese leaders have set out an annual GDP growth of about 5.5 percent, but many economists think the country will struggle to hit the target, despite announcing a better-than-expected 3.9 percent expansion in the third quarter.

And officials have shown no sign that they intend to ease the country's zero-Covid strategy, with President Xi Jinping last week promoting Li Qiang, who oversaw a debilitating two-month lockdown in Shanghai, to the second-most powerful post in the Communist Party.

O.Bulka--BTB