China's Factory Activity Contracts for Second Consecutive Month in November

30 Nov, 2023

China's Factory Activity Contracts for Second Consecutive Month in November

China's factory activity faced a second consecutive contraction in November, raising concerns about the robustness of the world's second-largest economy. The official manufacturing purchasing managers' index (PMI) unexpectedly dipped to 49.4 from October's 49.5, signaling ongoing challenges. Additionally, non-manufacturing activity hit a new low for the year, with the official non-manufacturing PMI slipping to 50.2 in November from 50.6 in October.

The weakness is attributed to insufficient market demand, affecting over 60% of manufacturing companies, according to Zhao Qinghe, a senior statistician at the National Bureau of Statistics. Despite some positive indicators, such as expansions in high-tech and equipment manufacturing, the overall manufacturing PMI fell below forecasts.

In the non-manufacturing sector, weakness in service industries, notably real estate, leasing, and business services, contributed to the decline. The business activity index for these industries stayed below 50, indicating further contraction.

While China's third-quarter economic growth exceeded expectations, the data remains inconsistent, revealing vulnerabilities in the vast economy. The government's efforts to deleverage the once-bloated real estate sector contribute to the economic challenges.