China: Manufacturing PMI returns to expansionary territory in November
The manufacturing Purchasing Managers’ Index (PMI) published by the National Bureau of Statistics (NBS) and the China Federation of Logistics and Purchasing (CFLP) rose from 49.3% in October to November’s 50.2%. The print was above the 49.5% result expected by market analysts. As a result, the index sits above the 50.0% threshold that separates contraction from expansion in the manufacturing sector for the first time in seven months.
November’s improvement reflected a sharp turnaround in new orders, along with stronger growth in the production index. While robust demand boosted suppliers’ delivery times and purchasing activity, job creation was unchanged. Despite remaining well below the 50.0% threshold, export orders gained some ground in November, likely reflecting hopes of a trade agreement between China and the United States. Input prices—a reliable leading indicator for inflation—receded further in the same month.
Against this backdrop, Ting Lu, Lisheng Wang and Jing Wang, economists at Nomura, comment that:
“The blip of a rise in the official manufacturing PMI certainly looks positive for markets, but we do not think such a rebound suggests a bottoming out of the economy, as strong growth headwinds remain, especially from the cooling property sector and China’s worsening fiscal situation. […] We do not think Beijing will overreact to this reading, as it has already learned the lessons from spring this year when some headline data pointed to a recovery. Amid a deteriorating growth outlook, Beijing will likely to roll out more easing measures despite limited policy room.”