China's October factory growth cools as output weakens

By KELVIN CHAN Markets Associated Press

Chinese manufacturing activity expanded in October at a slower pace than in the previous month as output weakened on softer demand in the world's No. 2 economy, according to an official survey released Tuesday.

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The purchasing managers' index fell to 51.6 from September's 52.4, based on a 100-point index on which the 50 mark divides expansion from contraction.

The Federation of Logistics & Purchasing's report found that production grew at a slower pace than the month before.

Both new export orders and overall new orders weakened, but the latter slowed at a faster pace, indicating flagging demand, especially from domestic customers.

A separate survey found China's services sector also lost momentum, with the official monthly non-manufacturing PMI falling to 54.3 from 55.4 the previous month.

The PMIs are widely watched leading indicators of essential parts of China's economy, which expanded at a still-robust 6.8 percent annual pace in the third quarter, according to data released earlier this month during a twice-a-decade Communist Party congress.

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The latest growth rate is a tick lower than the 6.9 percent growth in the previous three-month period.

Growth has been unexpectedly strong this year, but economists forecast activity will weaken as Beijing tightens up on bank lending to clamp down on rising debt that analyst say is the biggest threat to the country's economic stability.

"The manufacturing sector continues to maintain an expansionary trend," said Zhao Qinghe, senior statistician at the National Bureau of Statistics, which released the PMI data. He said some of the slowdown could be attributed authorities' ongoing efforts to cut pollution.

"This month, some areas continued to increase environmental pollution control efforts. Relevant enterprises adjusted their production schedule, cut production or adjusted their peak production," Zhao said.