Manufacturing slumps to 3-year low
Print Edition
China’s manufacturing activity fell to its lowest level for more than three years in November after recording its fourth straight month in decline.
The official Purchasing Managers’ Index fell 0.2 points from October to 49.6, according to the National Bureau of Statistics and the China Federation of Logistics and Purchasing.
The demarcation line between growth and expansion is set at 50 points.
The November reading was the lowest since August 2012.
Bureau analyst Zhao Qinghe said the data suggested worsening conditions due to sluggish demand at home and abroad.
“Some traditional industries, such as nonferrous metals, are in deeper contraction as they seek to rid themselves of overcapacity,” he said.
“But performance remained stable on the whole, as emerging sectors remained in expansionary territory,” he said.
The PMI’s component indexes showed widespread weakness in manufacturing, with new orders — a proxy for domestic and foreign demand — down 0.5 points at 49.8 and exports contracting to 46.4 for the 14th straight month. Input prices fell 3.3 points to 41.1.
Economists at ANZ said this points to persistent deflation in upstream prices, which would add pressure to factory gate prices and industrial profits.
October’s Producer Price Index — a measure of inflation at the factory gate — fell 5.9 percent year on year, extending its downward trend to a 44th month.
China’s gross domestic product in the third quarter rose 6.9 percent year on year, its slowest pace in six years. In an effort to bolster growth, the People’s Bank of China has cut benchmark interest rates and banks’ reserve requirement ratio five times this year.
The moves, however, have yet to have any major impact.
According to earlier figures, the profits of China’s industrial firms in October fell 4.6 percent year on year, following a 0.1 percent dip in September.
“With soft growth momentum and deflationary pressures growing, we expect the government to further ease its monetary policy and continue to implement an expansionary fiscal policy,” said ANZ economist Liu Ligang.
Despite the poor overall performance in November, private and export-oriented companies fared better than state-owned industrial enterprises.
The Caixin China PMI, a similar measure to the official PMI but weighted toward private and export-oriented manufacturing companies, rose to 48.6 last month, from 48.3 in October and 47.2 in September.
“Activity in the sector has been in contraction in each of the past nine months, but the November figure was the best since June,” said He Fan, chief economist at Caixin Insight.
The improvement was partly due to more stable output, which had been in decline over the past six months, he said.
Meanwhile, the official non-manufacturing PMI improved to 53.6 points in November, its highest level since July.
The gains were partly due to the Singles Day online sales event, the bureau said.
Julian Evans-Pritchard, an economist at Capital Economics, said in a research note: “The services sector appears strong, and there are hints that accelerating credit growth and fiscal spending may have continued to support investment growth last month.”
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