China manufacturing PMI 51.7 in November

India Infoline News Service | Mumbai | December 01, 2016 08:39 IST

The official Purchasing Managers' Index (PMI) stood at 51.7 in November, accelerating from previous month's 51.2 and above the 50-point mark that separates growth from contraction on a monthly basis.

China Service PMI
The official Purchasing Managers' Index (PMI) stood at 51.7 in November, accelerating from previous month's 51.2 and above the 50-point mark that separates growth from contraction on a monthly basis.

At 50.9 in November, the seasonally adjusted Purchasing Managers’ Index (PMI) – a composite indicator designed to provide a single figure snapshot of operating conditions in the manufacturing economy – fell from a 27-month high of 51.2 in October, to signal a marginal improvement in overall operating conditions. Nonetheless, the health of the sector has now strengthened in each of the past three months, which marks the longest period of improvement since late-2014.

Chinese manufacturers noted a further rise in production volumes during November, stretching the current sequence of expansion to five months. Though solid overall, the rate of output growth softened since October. Companies that raised production generally commented on greater intakes of new work. However, in line with the trend for output, the rate of new order book expansion weakened since the previous month and was moderate overall. A number of panellists suggested that stronger domestic demand was behind the latest rise in new business. Furthermore, new export work was broadly unchanged in November, after a slight decline in the previous survey period.
Firms continued to increase their purchasing activity in November, with the rate of growth edging up to a four-month high. However, the use of inputs in the production process led to a marginal drop in inventories of purchased items for the second month in a row. In contrast, stocks of finished items rose slightly in November, which some firms attributed to increased output.

A lack of stock at suppliers contributed to a further lengthening of delivery times. That said, the rate at which vendor performance
deteriorated was only marginal.

November signalled a further decline in Chinese manufacturing employment, as a number of companies sought to reduce their costs. That
said, the rate of job shedding was the weakest seen in 18 months. Nonetheless, a combination of lower staff numbers and increased new
work led to a further rise in outstanding business.

Inflationary pressures intensified over the month, with Chinese manufacturers signalling the sharpest increase in cost burdens since March 2011 during November. Anecdotal evidence suggested that higher prices for raw materials, particularly for items such as metals, had raised overall input costs. In order to help protect their margins, firms generally raised their prices charged, and to the greatest extent since February 2011.

Commenting on the China General Manufacturing PMI data, Dr. Zhengsheng Zhong, Director of Macroeconomic Analysis at CEBM Group said,  “The Caixin China General Manufacturing PMI came in at 50.9 in November, down from October's 51.2. It nonetheless marked the  second-highest reading in two years, indicating the manufacturing industry continued to pick up steam."

“Index readings for both output and new orders declined, but those tracking input and output prices rose at a faster pace to hit their highest levels in five years, pointing to further intensification of inflationary pressure.

“The Chinese economy continued to improve in November, although it lost some momentum compared to the previous month. Inventory and employment data also showed the foundation of growth is not solid yet and investors have to remain vigilant about the risk of a downturn in coming months.”


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