Electronics and equipment makers tied to AI hardware are still adding orders while consumer goods, textiles and metals contract, widening the gap Beijing's policy support must bridge.
China’s official manufacturing purchasing managers’ index (PMI) fell to 49.3 in October from 50.1 in September, back below the 50 line that separates expansion from contraction. The National Bureau of Statistics (NBS) and the China Federation of Logistics and Purchasing released the figure on October 31. It missed the 50.0 that economists polled by Reuters had expected, according to a Reuters report carried by Business Recorder, and marked the third contraction in four months.
The headline number hides a split that matters for anyone tracking China’s AI hardware supply chain. The PMI for high-tech manufacturing stood at 51.3 and equipment manufacturing at 50.6, both in expansion, Xinhua reported. Consumer goods fell to 48.8 and energy-intensive industries to 47.3, according to the bureau’s own interpretation of the data. Factories making computers, communication gear and electronics reported some of the strongest demand of any sector.
The weakness sits in domestic demand and in older industries. Production and new orders both slipped below 50, and new export orders stayed in contraction, Reuters reported. Whether the electronics strength can carry the wider factory sector into the year-end is the open question the next readings will test.
Electronics and transport equipment lead while textiles and metals shrink
The NBS breakdown names the winners. Production and new orders indices for computer, communication and electronic equipment were both at or above 53.0 in October, the bureau said. Railway, shipbuilding and aerospace equipment posted the same strength, according to the bureau’s interpretation, republished on a government channel of The Paper. Textiles, non-metallic mineral products and non-ferrous metal smelting were below 50 on both measures.
The overall production index fell 1.9 points to 49.8 and new orders fell 1.1 points to 49.4. Large companies stayed in expansion at 50.2, while medium-sized companies dropped to 48.4 and small companies to 47.5, China News Service reported. Consumer goods fell 1.9 points in a month, the sharpest drop among the industry groups.
Huo Lihui, chief statistician at the NBS Service Survey Center, attributed the decline to some demand being pulled forward before the October National Day holiday and to a complex international environment. Wen Tao, an analyst at the China Logistics Information Center, said the equipment manufacturing new orders index rose above 51 and that demand in high-tech manufacturing kept climbing, Xinhua reported.
Price gauges cool as non-manufacturing slows
Price pressure eased. The index of main raw material purchase prices fell 4.0 points to 56.8 and the index of factory-gate prices fell 2.3 points to 51.7. Both remain above 50, so prices are still rising, only more slowly. Huo said lower prices for some non-ferrous metals and other commodities were one reason.
The rest of the economy softened too. The non-manufacturing business activity index fell 0.5 points to 49.7, with services at 50.0 and construction at 48.0, down 2.3 points. The composite PMI output index, which combines factories and services, fell 1.0 point to 49.7, according to the NBS interpretation.
Economists read the data as a call for more support. "Insufficient demand is increasing downward pressure on the economy," Zhang Liqun, an analyst at the China Federation of Logistics and Purchasing, told Reuters. Zhang Zhiwei, chief economist at Pinpoint Asset Management, said that if external demand weakens in 2027, China will need stronger policy support for domestic demand. Lu Zhe, chief economist at Soochow Securities, called for wider mortgage interest subsidies to steady household confidence.
Export strength and AI earnings are carrying the cycle for now
The PMI split matches what China’s listed companies reported in the third quarter. Reuters pointed to AI optical-module maker Zhongji Innolight, which nearly tripled its quarterly net profit, against home furnishings maker Oppein Home, whose profit fell about 80%. China’s trade surplus is on track to exceed last year’s US$1.2 trillion, Reuters said, and EastFrontier has reported that integrated-circuit export value is rising far faster than volume.
Third-quarter GDP growth picked up to 4.5% from 4.3% in the second quarter, and the economy is expected to meet the 2026 target of 4.5% to 5.0% without extra stimulus, according to Reuters. The October miss came against a Bloomberg forecast of 49.9, AFP reported via The China-Global South Project.
The November PMI, due at the end of this month, will show whether electronics and equipment orders keep offsetting weak spending at home. A high-tech PMI that slips toward 50 would be the first sign that the AI hardware cycle is no longer enough to hold up China’s factories.