Official China PMI slows in October amid environmental crackdown

China's economy slowed down in October, according to the results of two 'official' surveys.

According to the National Bureau of Statistics, the October factory sector purchasing managers' index retreated from a reading of 52.4 for September to 51.7 in October, a three-month low.

According to Julian Evans-Pritchard at Capital Economics, softer domestic demand was the main culprit, as reflected in a larger drop for a sub-index of new orders versus that in new export orders.

Price pressures also remained elevated, as capacity cuts and factory shutdowns linked to an ogoing environmental crackdown continued to put upward pressure on prices.

In parallel, the results of the official non-manufacturing PMI, which were also released on Tuesday, also hinted at weaker activity on that side of the economy, Evans-Pritchard said.

The non-manufacturing PMI slipped from a reading of 55.4 in September to 54.3, amid declines in both service sector and construction activity.

Evans-Pritchard linked weakness in the official PMI's to disruptions to industrial activity in the North East of China due to the government's environmental crackdown, lower investment spending on the back of a slowdown in credit growth and the unwinding of fiscal support after the end of the Communist Party congress.

"We anticipate further weakness as in the months ahead as these drags on growth intensify."