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China's factory growth falls to five-month lows

Johannes Eisele | AFP | Getty Images

Growth in China's factories fell to a five-month low in October, missing expectations for an expansion as manufacturers battled cooling order growth and rising costs in the slowing economy.

The official Purchasing Managers' Index (PMI) eased to 50.8 in October from September's 51.1, the National Bureau of Statistics said on Saturday, but above the 50-point level that separates growth from contraction on a monthly basis.

Analysts polled by Reuters had forecast a reading of 51.2.

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Growth in new orders cooled in October, as the index retreated to 51.6 from 52.2. New export orders were 49.9 in October, pointing to a contraction, from 50.2 in September.

"The fall in the index also reflects the downward pressure on the economy," said Chen Zhongtao, an official at the China Logistics Information Centre, which helps publishes the PMI.

"There is a need to carry out more quickly the policy measures related to 'stabilising growth,'" Chen said, referrring to recent government announcements aimed at supporting the economy.

The Chinese economy has had a tough year, with growth falling to its lowest level since the 2008/09 global financial crisis between July and September, due to a sagging housing market and cooling domestic demand and investment.

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The PMI data followed warnings by China's industrial ministry on Friday that factories were under pressure from high borrowing costs, which were further exacerbating the sector's slowdown.

The report also showed that big factories were weathering the slowdown better than their smaller peers.

Large manufacturers grew last month with their PMI little changed at 51.9, while business shrank for small- to medium-sized factories.

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The PMI for mid-sized factories fell to 49.1 in October from September's 50, and the index for small manufacturers was little changed at 48.5.

To support its economy, China has cut taxes, quickened some investment projects, lent short-term loans to banks, instructed local governments to spend their budgets and reduced the amount of deposits that some banks hold as reserves to spur lending.

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But the raft of measures - which were issued over a space of a few months - have failed to sustain momentum in the economy, prompting authorities to take one of their most drastic policy actions this year by cutting mortgage rates in September.