Manufacturing expansion continues in November

The weakness in the PMI was attributed to sluggish domestic and off-shore demand. The data therefore suggest that the downturn in foreign trade seen throughout much of 2015 is starting to reverse, albeit only modestly. Data last week showed profits earned by Chinese industrial companies fell 4.6 percent in October from a year earlier, declining for the fifth consecutive month industries deal with soft demand and overcapacity.

As regards the most important sub-indices, the production quantity sub-index rose relative to October and after signalling contraction for two month it has been showing expansion for the 3rd month in a row. That said, the rate of growth was the weakest over this period.

“Although the pace of growth so far is only very modest, it positions manufacturing as less of a drag on the broader economy”, Markit economist Rob Dobson said in a statement.

India’s economy is fundamentally sound due to its high foreign exchange reserves of $354 billion, its high flow of long-term investments or foreign direct investments, and its support from the current government for an increased ease of doing business. Although only slight, the rate of growth was the strongest in three months. Sectors such as delivery received a particular boost in November from China’s Singles’ Day, the world’s largest online retail festival, while financial services and software continue to grow, according to official reports, and the PMI for new orders in the non-manufacturing sector also continued to rise. The index was at 50.7 in October.

Outstanding business orders held by producers rose in November, amid evidence of delayed payments from clients and labour shortages. The level of finished goods turned out lower in November than in October and the latest figure is below the average and is the 4th-lowest since 1995. Stocks of purchases declined for the first time in one-and-a-half years, which panelists associated with falling quantities of inputs bought.

The decrease in purchasing costs was especially marked, with the rate of deflation remaining among the fastest seen in the near 24-year series history.

A private survey, the Caixin/Markit China PMI, which focuses on small and mid-sized companies, edged up to its highest reading since June, but still pointed to a ninth month of contraction. “Meanwhile, the weak real continued to add to firms’ cost burdens and factory gate charges were raised again”.

More supportive policies will be needed in the coming months to support economic growth, Xu Gao, chief economist with Everbright Securities, said in a research note sent to the Global Times on Tuesday.