China factories still in contraction; November PMI at 49.6

(adds Caixin reading, with recasts throughout)

SINGAPORE (ICIS)–China’s factories continued to contract in November based on the country’s official manufacturing purchasing managers’ index (PMI) of 49.6, down from 49.8 in October, as new orders, exports and purchasing prices declined, government data showed on Tuesday.

A PMI reading above 50 indicates an expansion, while a reading below 50 denotes a contraction in the manufacturing activities.

In November, the new export orders sub-index declined to 46.4 from 47.4 in the previous month, according to the China Federation of Logistics & Purchasing (CFLP).

The import sub-index also fell to 46.7 from 47.5 in October, while purchasing prices slumped to 41.1 from 44.4 over the same period.

The production sub-index fell to 51.9 in November from 52.2 in October, while new orders slipped to 49.8 from 50.3 in the previous month, the data showed.

Meanwhile, Caixin had a 48.6 PMI reading for China in November, slightly up from 48.3 in October, citing a pick-up in new export business and output, the Chinese media group said in a statement released on Tuesday.

“The health of the [manufacturing] sector has now worsened in each of the past nine months,” Caixin said in a joint statement with Markit, a financial information services provider that compiled the PMI survey.

Weaker domestic demand weighed on new orders but new export business expanded in November at the quickest rate in 13 months, boosted by improved foreign demand.

The increase in the November PMI “indicates that pressure on economic growth has eased and fiscal policy has had a strong effect”, said He Fan, chief economist at Caixin Insight Group.

“Overall, the economy is still on track to become more stable,” the economist said.

On 21 November, a separate survey of Chinese manufacturers called Minxin – which is jointly conducted by the China Academy of New Supply-side Economics and China Minsheng Bank – showed a 42.4 initial PMI reading for the month.

The Minxin manufacturing PMI focuses on private and small-sized firms in China, while the official index tracks large firms such as state-owned enterprises.

Minxin PMI is based on a survey of around 1,800 manufacturing companies in the country, while China’s official PMI is based on 3,000 manufacturers.

Additional reporting by Nurluqman Suratman

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