China factory index at 3-year low, services improve

The pace of contraction in China’s manufacturing sector slowed in November and the services sector grew, signs that the country’s transition to a consumption-driven economy is back on track after a torrid summer, surveys showed Tuesday. In China, South Africa’s biggest trading partner, the official manufacturing PMI slipped to its lowest level since August 2012 to 49.6 points, down from 49.8 points in October.

The Caixin survey tends to have a stronger focus on small to medium enterprises than the official PMI data. There were reports that growth of new work was hampered by subdued domestic demand and competitive pressures.

“Activity in the sector has been in contraction in each of the past nine months, but the November figure was the best since June”, said He Fan, chief economist at Caixin Insight.

Average prices charged by manufacturers fell for the third month running and average input costs continued to drop sharply.

Readings of output, new orders, inventories and employment all weakened from October, the manufacturing PMI report showed.

The consumer goods sector gained the strongest expansion in the three main sectors, and the investment goods sector also saw a solid growth.

The CSO reported on 4 Nov that on an annual basis production for September 2015 increased by 20.1% when compared with September 2014. “What we are hearing from the tech companies is that there has been a cutback in orders for electronics; we expect (the) trend to remain in contraction mode”, said Credit Suisse economist Michael Wan.

Away from China’s factories, an official gauge of non-manufacturing activity for November stood at 53.6, showing expansion. Speaking at a recent conference of the American Chamber of Commerce in Shanghai, Zhu predicted that China’s service sector, which has continued to see double-digit growth this year, would carry on growing healthily, while manufacturing slowed.

With financial markets on edge ahead of any repercussions should the Fed go ahead and raise rates, Asian central banks are for the most part staying pat for now while hinting there is room to ease further if conditions do not improve next year.

According to the GDP data for the second quarter of 2015-16 released by the Ministry of Statistics and Programme Implementation on Monday, the manufacturing sector expanded at 9.3 per cent-the highest in 12 quarters, buoying growth in the industry.