J.P. Morgan: China’s manufacturing output expanded in October, but selling prices and employment remained weak

Why is production still resilient?

In October 2026, the RatingDog China manufacturing PMI edged down to 52.0 from 52.1 in September, remaining in expansion territory for the 11th consecutive month; the output index rose 0.1 points to 53.7, its highest since April.
Output expanded in all three manufacturing subsectors surveyed, with orders for investment goods growing faster. However, the National Bureau of Statistics manufacturing PMI for the same period was 49.3, in contraction territory, indicating different levels of activity in the two surveys.
The index of companies’ expectations for future output fell to 53.9 from 54.4, a nine-month low. Companies still expect growth over the coming year, but costs and competition have weakened confidence in its sustainability.

Purchasing activity grew at its fastest pace since February, and the accumulation of raw material inventories reached a five-month high; the finished goods inventory index fell to 50.1 from 51.0, as some companies drew on stocks to fulfill orders. JPMorgan therefore concluded that inventory building was driven mainly by orders, rather than an accumulation of unsold goods.
Orders provided limited support for hiring: the backlogs of work index rose to 51.3 from 51.2, while the employment index fell 0.3 points to 50.2, only slightly above the dividing line between expansion and contraction.

The input prices index fell 1.8 points to 52.3 in October, indicating that costs were still rising but at a slower pace; the factory-gate selling prices index fell 0.9 points to 49.6, moving into contraction territory, and export prices also fell for the first time in nearly a year.
The gap between the input and output price indices narrowed to 2.7 points from 3.6, but renewed price cuts by companies indicate that cost pass-through to selling prices remains weak; the index gap is not itself a profit margin. Selling prices in the National Bureau of Statistics survey continued to rise, showing that price trends differ across the survey samples.
JPMorgan believes slower cost increases in both surveys signal weakening momentum in industrial producer price growth, although energy, metals and building materials may continue to support month-on-month increases; softer food prices and weak demand may offset the effect of higher energy prices on consumer prices.

JPMorgan believes investment goods supported production, but a broader investment recovery depends on the deployment of fiscal funds. Stronger bond issuance and an increase of 550 billion yuan in local governments’ new debt quotas provided support; cautious approvals and changes in local leadership could delay spending.
The construction PMI was 48.0, indicating that financing was progressing faster than actual activity. The trade truce also eased the risk of export disruption, but issues including technology controls, critical mineral disputes and electric vehicle tariffs remain unresolved, and trade stability alone cannot repair weak domestic demand.
The bank believes fiscal implementation and trade stability help sustain production; a lasting recovery will also require stronger hiring, household demand and corporate pricing power.