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China’s factory activity grows in November as supply pressures ease

China's factory activity grows in November as supply pressures ease

December 2, 2021: -China’s factory activity unexpectedly picked up in November, growing for the first time in three months as raw material prices decrease and power rationing abated, taking some pressure off a manufacturing sector grappling with weak demand.

The official manufacturing Purchasing Manager’s Index was at 50.1 in November, up from 49.2 in October, data from the National Bureau of Statistics (NBS) showed on Tuesday.

The 50-point mark separates growth from contraction, and analysts had expected it to come in at 49.6.

The world’s second-largest economy, which staged an impressive rebound from last year’s pandemic slump, has lost momentum in the second half of the year as it grapples with a slowing manufacturing sector, debt problems in the property market, and Covid-19 outbreaks.

Analysts expect a further slowdown in fourth-quarter gross domestic product (GDP) growth from a 4.9% year-on-year rise in the previous quarter.

Reflecting the positive headline PMI, a sub-index for production rose to 52.0 in November from 48.4 in October due to easing power rationing and the pullback in some raw material prices.

New orders also fell slower, although November marked the fourth straight month of declines in customer demand.

A sub-index for input prices stood at 52.9 in November, down significantly from 72.1 in the previous month.

Factory gate inflation hit a 26-year high in October, further squeezing profit margins for producers and heightening stagflation concerns. As a result, policy sources say China’s central bank will likely move cautiously on loosening monetary policy to bolster the economy.

Premier Li Keqiang last week acknowledged that China’s economy faces new downward pressures but said authorities should avoid an “aggressive” one-size-fits-all approach.

In November, the official non-manufacturing PMI eased to 52.3 from 52.4 in October, as the services sector took a hit from the new lockdown measures as China raced to contain the latest outbreak.

China’s official October composite PMI, which includes manufacturing and services activity, stood at 52 .2, up from October’s 50.8.

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China’s factory activity grows in November as supply pressures ease