Factory output is strong in spite of lower exports

Source: Xinhua | 2018-12-04

China’s manufacturing activity remained steady in November despite reduced amounts of export orders.

The Caixin China General Manufacturing Purchasing Managers’ Index edged up 0.1 points to 50.2 last month from October, according to the survey conducted by financial information service provider Markit for Caixin Media.

A reading above 50 signals growth, while one below 50 is a contraction.

The Caixin PMI reading differed from the dip of 0.2 points to 50 in November from a month earlier for the official PMI released by the National Bureau of Statistics on Friday.

The subindex for new orders continued to rise, pointing to improved demand, which may be due to a recent raft of government policies to support the private sector.

The gauge for new export orders dropped further in November, indicating the impact of Sino-US trade friction on exports, said Zhong Zhengsheng, director of macro-economic analysis at CEBM Group.

Meanwhile, the employment subindex dipped further into negative territory.

The output subindex dropped to the dividing line of 50 that separates expansion from contraction, marking its lowest level since June 2016, which implied production was facing a slowing trend.

“One key reason for the slowdown may be the obvious increase in stocks of finished goods,” Zhong said.

The subindex for suppliers’ delivery times also picked up marginally despite remaining in negative territory, implying capital turnover among goods improved slightly, he said.

Although purchasing costs continued to increase in November, the nation’s rate of inflation eased to a seven-month low.

At the same time, efforts to stimulate client demand led to a renewed fall in prices charged by manufacturers.

Business confidence picked up from October’s 11-month low, but remained relatively weak in the context of the series history.

While some firms anticipate new products and stronger demand conditions to boost output, a number of companies cited concerns over the impact of strict environmental policies and relatively sluggish market conditions, according to the report.

“Overall, domestic demand across the manufacturing sector improved in November, while overseas demand was still subdued,” Zhong said.