Today Markets Analysis

China’s official economic data delivered a fresh warning about the strength of domestic activity in October 2026, with both the services and manufacturing sectors unexpectedly moving deeper into contraction.

The NBS Non-Manufacturing PMI fell to 49.7 from 50.2 in September, missing expectations of 50.5 and signalling a contraction in services and construction activity. The manufacturing PMI also weakened, declining to 49.3 from 50.1, while the NBS Composite PMI Output Index dropped to 49.7 from 50.7.

The figures point to broad-based weakness across China’s economy as the boost from the Golden Week holiday fades. New orders and export sales deteriorated in the services sector, while manufacturing output, purchasing activity and export orders also weakened.

The latest readings raise concerns about the strength of domestic demand and the durability of China’s economic recovery. Although high-tech manufacturing continues to show resilience, the wider business environment remains under pressure.

Market Snapshot

Indicator	October 2026	September 2026
NBS Non-Manufacturing PMI	49.7	50.2
NBS Manufacturing PMI	49.3	50.1
NBS Composite PMI Output	49.7	50.7
Services new orders	44.4	46.5
Services export sales	46.5	48.5
Services employment	46.0	45.9
Manufacturing output	49.3	50.1
Manufacturing new orders	49.4	50.5
Manufacturing export orders	48.7	50.0
Non-manufacturing business confidence	50.7	51.3
Manufacturing business confidence	53.4	53.8

PMI readings above 50 indicate expansion, while readings below 50 indicate contraction.

Services Activity Returns to Contraction

China’s official Non-Manufacturing PMI declined to 49.7 in October, falling below the 50-point threshold for the sixth time so far this year.

Both construction and services activity weakened, with the seasonal impact of the Golden Week holiday partly contributing to the slowdown.

The deterioration in new orders was particularly notable. The index fell to 44.4 from 46.5, indicating a deeper contraction in incoming business. Export sales also weakened, dropping to 46.5 from 48.5.

Employment remained firmly in contraction at 46.0, compared with 45.9 in September. The marginal improvement does little to change the broader picture of subdued labour demand across the non-manufacturing economy.

The latest figures suggest that businesses are still struggling to generate stronger demand, even as activity moves beyond the seasonal holiday period.

Manufacturing Sector Also Weakens Unexpectedly

The weakness was not confined to services. China’s official Manufacturing PMI fell to 49.3 in October from 50.1 in September, missing expectations of 50.0 and recording its lowest reading since July.

The decline reflects softer domestic demand and a loss of momentum following the Golden Week holiday. Overseas demand also weakened, despite continued resilience in AI-related trade.

Manufacturing output fell to 49.3 from 50.1, moving back into contraction. New orders declined to 49.4 from 50.5, while export orders dropped to 48.7 from 50.0.

Purchasing activity also weakened sharply, falling to 48.9 from 51.0 and indicating the first contraction in three months.

Employment remained unchanged at 48.4, continuing to signal contraction in factory staffing.

The data point to a broad slowdown in manufacturing activity, with weaker orders and purchasing decisions suggesting that businesses remain cautious about the demand outlook.

Composite PMI Signals Broad-Based Economic Weakness

China’s NBS Composite PMI Output Index fell to 49.7 in October from September’s nine-month high of 50.7.

This represents the fifth contraction in overall business activity so far this year and reflects the combined weakness across manufacturing and non-manufacturing sectors.

The services sector returned to contraction after briefly expanding in September, while manufacturing output also weakened.

High-tech manufacturing remains a relative area of resilience, supported by AI-related demand. However, this strength has not been sufficient to offset softer activity across the wider economy.

NBS statistician Huo Lihui attributed part of the slowdown to the impact of the Golden Week holiday. Nevertheless, the decline across new orders, output and business confidence suggests that domestic demand remains an important concern.

New Orders and Export Demand Remain Under Pressure

The October figures highlight weakening demand across both services and manufacturing.

In the non-manufacturing sector, new orders fell to 44.4 from 46.5, while export sales declined to 46.5 from 48.5. Both readings indicate a deeper contraction.

Manufacturing showed a similar pattern. New orders fell to 49.4, while export orders slipped to 48.7, moving back below the expansion threshold.

The deterioration in domestic and overseas orders suggests that businesses are facing challenges on both sides of the demand equation.

For manufacturers, weaker purchasing activity may also reflect a more cautious approach to inventory and production planning.

Input Costs Rise in Services While Selling Prices Weaken

Price indicators presented a mixed picture across the non-manufacturing sector.

Input prices increased for a third consecutive month, although the pace of growth eased. The index declined to 51.5 from 52.5.

Selling prices, meanwhile, returned to contraction, falling to 49.5 from 50.3 after briefly expanding in September.

This combination suggests that businesses continue to face some cost pressure while experiencing difficulty maintaining selling prices.

In manufacturing, input cost inflation eased to 56.8 from 60.8, while output price growth slowed to 51.7 from 54.0.

The moderation in manufacturing input and output price growth may offer some relief on the cost side, although the broader weakness in demand remains a concern.

Employment and Business Confidence Signal Continued Caution

Employment conditions remain weak across both sectors.

The non-manufacturing employment index edged up to 46.0 from 45.9, while manufacturing employment remained unchanged at 48.4. Both readings remain below 50, indicating continued contraction.

Business confidence also weakened.

Non-manufacturing confidence fell to 50.7 from 51.3, reaching an eight-month low. Manufacturing confidence declined to 53.4 from 53.8, its lowest level in seven months.

Although manufacturing confidence remains above the expansion threshold, the decline across both sectors indicates that businesses are becoming more cautious about future activity.

Bullish Sentiment

1. High-tech manufacturing resilience: AI-related demand continues to provide support to parts of China’s manufacturing economy, offering a potential offset to weakness elsewhere.
2. Golden Week distortion: The seasonal impact of the holiday contributed to the October slowdown, meaning some of the weakness may not necessarily represent a permanent deterioration in underlying activity.
3. Moderating manufacturing input costs: The manufacturing input-price index eased to 56.8 from 60.8, indicating a slower pace of cost inflation.
4. Manufacturing confidence remains above 50: Although confidence declined to 53.4, the index remains in expansion territory, suggesting that manufacturers are not uniformly pessimistic.

Bearish Sentiment

1. Services activity contracts: The Non-Manufacturing PMI fell to 49.7, marking the sixth contraction in the sector so far this year.
2. Manufacturing returns to contraction: The Manufacturing PMI declined to 49.3, its lowest reading since July, pointing to weakening factory activity.
3. New orders deteriorate: Services new orders fell to 44.4, while manufacturing new orders declined to 49.4, highlighting subdued demand.
4. Export demand weakens: Services export sales fell to 46.5 and manufacturing export orders declined to 48.7, indicating pressure from overseas markets.
5. Employment remains weak: Both manufacturing and non-manufacturing employment indices remain below 50, reflecting continued contraction in staffing activity.
6. Business confidence falls: Non-manufacturing confidence reached an eight-month low, while manufacturing confidence declined to a seven-month low.
7. Composite activity contracts: The Composite PMI Output Index dropped to 49.7, indicating that weakness extends across the wider economy.

Monday China Economic Outlook: What Markets Should Watch at the Open

China’s October PMI figures provide a cautious starting point for the new trading week. The simultaneous decline in manufacturing, services and composite activity reinforces concerns that domestic economic momentum remains fragile.

The immediate focus will be on how markets interpret the scale of the slowdown. The seasonal impact of Golden Week offers a partial explanation, but the deeper contraction in new orders and export sales suggests that demand weakness remains an important underlying issue.

Bullish scenario

Markets could take some comfort from the possibility that the October slowdown partly reflects seasonal disruption rather than a sustained deterioration in economic activity.

Continued resilience in high-tech manufacturing and AI-related trade may also help limit the impact of weakness in other sectors. A stabilisation in new orders and business confidence would improve the outlook for China’s domestic economy.

Bearish scenario

A sustained decline in manufacturing and services activity could increase concerns about domestic demand and the broader economic outlook.

Further weakness in new orders, export sales and employment would reinforce the view that businesses are struggling to generate growth. Continued deterioration in confidence could also weigh on expectations for future investment and activity.

Monday directional bias: Cautiously bearish for the China growth outlook.

The October data show contraction across all three headline PMI measures, with particularly weak readings in services new orders and export demand. The Golden Week effect may explain part of the decline, but the breadth of the weakness makes it difficult to dismiss the figures as purely seasonal.

Price Forecast: What Traders Are Watching

The latest PMI figures do not provide a direct price forecast, but they offer important signals for markets exposed to China’s economic performance.

Traders and investors will be watching:

• Whether the decline in manufacturing and services activity continues beyond the Golden Week period.
• Whether domestic new orders begin to stabilise.
• Whether export demand improves or remains in contraction.
• The direction of employment indices across both sectors.
• Whether input-cost inflation continues to ease.
• Whether business confidence recovers from its recent lows.
• The relative resilience of high-tech manufacturing and AI-related demand.

The key issue is whether October represents a temporary seasonal setback or a broader loss of economic momentum.

Market Outlook for the Coming Sessions

China’s October PMI releases present a broadly negative picture of economic activity. Manufacturing, services and composite output all moved into contraction, while new orders, export demand and employment remained under pressure.

The seasonal impact of Golden Week should be considered when assessing the latest readings, but the deterioration across several indicators suggests that demand remains fragile.

High-tech manufacturing continues to provide some support, while moderating manufacturing input costs may offer limited relief to businesses. However, these factors have not yet translated into stronger activity across the wider economy.

For the coming sessions, markets are likely to remain sensitive to further evidence of China’s domestic demand conditions and whether the October weakness proves temporary or more persistent.

Currency Hedger View

China’s weaker October PMI readings highlight the importance of monitoring economic conditions in one of the world’s major manufacturing and trading economies.

For businesses importing from China, purchasing industrial materials or receiving revenue from Chinese customers, changes in economic activity can affect demand, supplier conditions and commercial planning.

Currency movements add another layer of uncertainty. Companies settling transactions in renminbi, US dollars, euros or other currencies may face exchange-rate exposure alongside changes in underlying business conditions.

Currency Hedger helps businesses assess their foreign-exchange exposure and explore appropriate risk-management strategies around international payments and commercial transactions.

Explore Currency Hedger or open an account to discuss your exposure.

Disclaimer: This market analysis is provided for informational purposes only and does not constitute investment advice, a recommendation or an offer to buy or sell any financial instrument. Economic indicators can be revised and may not fully reflect future economic conditions. Financial markets involve risk, and prices can move sharply in response to economic, political and monetary developments. Always undertake independent research and seek professional advice where appropriate.