Both the official and Caixin PMIs showed that manufacturing activity contracted in September. The two PMI gauges also indicated that the non-manufacturing activity has slowed and is at or near the expansion/ contraction threshold of 50. The deflationary pressure has persisted and likely worsened for the non-manufacturing sector in September, UOB Group economist Ho Woei Chen notes.

Manufacturing in contraction while non-manufacturing slowed in September

The official and Caixin PMIs indicate that economic activities have likely slowed further in September.

Weaker employment and increased deflationary pressure in the nonmanufacturing sector warrant concerns.

Without the aggressive stimulus package that was announced last week, the economy is likely to continue to head lower. We now expect some stabilization in the near-term with any positive impact to take time to be translated to the economy which continues to confront structural challenges that reduce its growth potential.