Overnight, China revealed the latest confirmation that its economy is slowing more conventional wisdom realizes when the National Bureau of Statistics reported that the manufacturing PMI fell to 50.2 in October – on the verge of a sub-50 contraction – down from 50.8 in September and below the 50.6 estimate. It was also the lowest number since July 2016 with almost all sub-indexes showing weaker growth momentum. The NBS non-manufacturing PMI also missed, printing at 53.9, and declining from 54.9 due to the weaker services PMI.

Commenting on the report, Goldman said that “growth faced increased downward pressures in the manufacturing sector” and highlighting the continued decline of trade-related indexes, noted that “weaker external demand has possibly weighed on activity growth in the manufacturing sector.”  Meanwhile, weaker auto sales also translated into soft auto manufacturing activities and dragged on overall manufacturing growth.

Goldman also blamed “slower property transactions” for the drop in the services PMI, which was further impacted by the the drop in the stock market : the NBS observed that the October PMI reading for the securities industry was the lowest this year, excluding the Chinese New Year months.

But most importantly, Goldman – as well as most China watchers – took the report to indicate further accommodative policy would be ushered in by Beijing to support contracting economic growth (Goldman expects one more RRR cut before the end of this year).

Perhaps hearing this request, on Wednesday China’s leadership vowed that further stimulus is being planned to prevent the broad slowdown from taking hold. Admitting that Beijing’s cocktail of fiscal and monetary stimulus has been behind the curve, a Wednesday Politburo meeting chaired by the president said that “downward pressure” is increasing, and the government needs to take timely measures to counter this.

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