China’s manufacturing activity returned to contraction in Oct, shows data

China’s manufacturing activity unexpectedly returned to contraction in October, an official factory survey showed on Tuesday, casting a cloud over recent indicators showing a nascent recovery in the world’s second-largest economy.

The official purchasing managers’ index (PMI) fell from 50.2 to 49.5 in October, falling back below the 50-point level that marks the contraction due to the expansion. The measurement also missed a prediction of 50.2.

Policymakers have unveiled a series of measures since June to support growth, including modest interest rate cuts, larger cash injections and more aggressive fiscal stimulus.

But analysts say more policy support may be needed to ensure the economy meets Beijing’s annual growth target of around 5 percent.

China’s top parliamentary body last week approved a 1 trillion yuan ($137 billion) government bond issuance in the fourth quarter, and approved a bill allowing local governments to bring forward part of their 2024 bond quotas to support investment and economic growth.

Earlier this month, the central bank injected the biggest cash support since late 2020 through short-term policy loans to allow banks to extend credit and keep interest rates low.

China’s economy grew faster than expected in the third quarter, while consumption and industrial activity also surprised on the upside last month, suggesting the recent wave of policy measures is helping to support a cautious recovery.

Nomura, JPMorgan and Moody’s Analytics all upgraded their 2023 growth forecasts following rosier-than-expected third-quarter figures.

But an ongoing real estate crisis has put severe pressure on the economy, while slowing global growth has also increased challenges for authorities trying to boost momentum.