Manufacturing PMI weakens to lowest in three years
China’s manufacturing conditions slipped to the weakest level in more than three years as sluggishness in the nation’s old growth drivers added to risks facing the government’s growth target.
The official purchasing managers index fell to 49.6 in November, the National Bureau of Statistics said on Tuesday — the lowest level since August 2012. That compared with a level of 49.8 for September and October. The nonmanufacturing PMI rose to 53.6 from 53.1 a month earlier. Numbers below 50 indicate a slowdown.
“The data show further divergence in manufacturing and nonmanufacturing sectors,” said Zhu Qibing, a Beijing-based analyst at China Minzu Securities. “Considering further cuts in overcapacity, the divergence will continue into at least mid2016.”
Readings of output, new orders, inventories and employment all weakened from October, the official manufacturing PMI report showed. Input prices for raw materials slumped to the lowest point this year, according to an NBS statement.
“Deflationary pressures are rising,” saidQuHongbin, chief China economist and co-head of Asian economic research at HSBC Holdings in Hong Kong. “Since entrenched deflation would exacerbate the debt problem and risk a downward spiral, now is the time for Beijing to act in a more decisive and coordinated manner to lift confidence and end deflation.”
Arangeof private indicators for November had suggested conditions remained weak for China’s industrial sector.
A PMI reading for the steel industry slumped to 37 in November.
“The steel sector in China continues to come under overcapacity pressures as well as declining demand on the back of slumping property investment,” according to a recent report by Liu Li-Gang, head of China economics at Australia & New Zealand Banking Group in Hong Kong.
the downturn, the People’s Bank of China has cut benchmark borrowing costs to a record low and is adding funds to the banking system as it moves to a newmonetary framework.
“Substantial policy support has yet to make the economy any better, though it has at least stopped it from getting worse,” Bloomberg Intelligence economists Tom Orlik and Fielding Chen wrote in a note. “Policy will remain supportive, including further rate cuts in 2016 and amped up fiscal spending. Accelerated easing is not yet called for.”