- China's vast manufacturing sector expanded moderately in October to snap three months of contraction. HSBC's flash purchasing managers' index (PMI) also showed price pressures eased in China, underlining consumer price data that has shown a slight pullback in inflation from three-year peaks.
- The flash PMI, designed to give an early snapshot of the month's factory activity, rose to 51.1 in October from September's final reading of 49.9 as new orders and new export orders expanded. The reading surpassed the 50-point level demarcating expansion from contraction for the first time since June, when the PMI was 51.6.
- Both new orders and new export orders sub-indexes rose above the 50-point mark in October. Given the gloomy global outlook, however, it is too early to determine if the rebound in export orders can be sustained.
- The input price sub-index fell to 54.3 in October from 58.8 in September.
- "Thanks to the pick-up in new orders and output, the headline flash PMI rebounded back into expansionary territory during October, marking a steady start to manufacturing activities in the four quarter," said Qu Hongbin, China economist at HSBC. "Meanwhile, inflation components within the PMI results confirmed stable output prices growth and slower input price inflation. All these data confirm our view that there is no risk of a hard landing in China," he said.
Over to Europe...
- The euro zone's private sector tipped further into decline in October, according to business surveys on Monday that showed the bloc's economy is in serious danger of lurching from stagnation into outright recession.
- Shrinking order books and plummeting confidence sent euro zone factories into contraction for the third month in a row, and service sector companies for a second month.
- The Flash Markit Eurozone Services Purchasing Managers' Index (PMI), which measures business activity at thousands of firms from banks to restaurants, sank to 47.2 this month from September's 48.8, well below a Reuters consensus of 48.5.
- "Most indicators seem to suggest it is going to get worse not better in the coming months. So there is a significant chance of a contraction in the fourth quarter," said Chris Williamson, chief economist at survey compiler Markit.
- He said the current level of the indexes, which have a good record of tracking economic growth, could signal a quarterly rate of decline approaching half a percentage point.
- The services new business sub-index fell to 46.2 in October from 47.1 in September, its lowest reading since July 2009 when the euro zone was still escaping the worst recession since World War II.
- German manufacturing contracted this month for the first time in two years, according to individual country PMIs released earlier on Monday. The service sector rebounded unexpectedly but that was perhaps the only bright spot among this month's surveys.
- The euro zone's manufacturing PMI slipped to 47.3 in October from 48.5 last month, its lowest point since July 2009. The output index, which feeds into the broader composite survey that combines manufacturing and services, fell to 47.2 from 49.6 in September.
- Like the service sector survey, manufacturers reported a steep fall in new business, with the index for that slipping to 43.7 from 45.2 the previous month -- its lowest reading since May 2009.
- "There is little to see what will cause an improvement for the first quarter (next year) unless European leaders in the next few weeks manage to bring out a convincing package to restore confidence," said Markit's Williamson.
- The composite PMI, a broader measure of private sector activity, also fell sharply, from 49.1 in September to 47.2 this month. Its employment index fell to 50.3 from 51.0, showing an effectively stagnant labor market. Worryingly, Markit suggested worse is on its way for euro zone workers.
- Williamson pointed to this month's backlog of work index, which fell to its lowest level since August 2009, and tends to lead the employment index. "We can expect to see some disappointing news on the labor market front and that is going to further hit consumer confidence."