Chinese factory activity contracts for second consecutive month

The latest official survey of Chinese manufacturers reveals that factory activity contracted for the second consecutive month in November, signaling weak demand despite various stimulus measures implemented to support the economy.
According to data released by the National Bureau of Statistics on Thursday, the official manufacturing purchasing managers’ index dropped to 49.4 in November, a slight decrease from October’s 49.5.
A figure below 50 indicates a contraction in manufacturing activity, while a number above 50 reflects expansion on a scale up to 100. The index has fallen in seven of the past eight months, experiencing an increase only in September.
Despite prolonged weakness following the pandemic, the economy is anticipated to grow at approximately a 5% annual pace this year. In addition to the overall contraction, the new orders sub-index decreased for a second consecutive month, and two other sub-indices for raw material inventory and employment also recorded declines.
China’s rebound from the COVID-19 pandemic has stumbled, with an initial surge in growth earlier in the year fading more rapidly than anticipated. Despite persistent weaknesses in consumer spending and exports, the economy is projected to achieve a growth rate of approximately 5% annually this year.
Analysts at Capital Economics, Sheana Yue and Julian Evans-Pritchard, noted in a statement that the latest surveys might be “overstating the extent of the slowdown due to sentiment effects.” They pointed out that this was the case in October, with the hard data proving not as weak as suggested by the PMIs.