Caixin PMI: China Nov. factory growth slows to 5-month low

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China’s manufacturing activity grew at the weakest pace in five months in November as input costs remained high and tougher pollution measures weighed on business confidence, a private survey showed on Friday.

The Caixin/Markit Manufacturing Purchasing Manager’s Index (PMI) dipped to 50.8 from 51.0 in October, but was roughly in line with economists’ expectations for a slight drop to 50.9.

While the index remained above the 50-point mark that divides growth from contraction on a monthly basis, it was the weakest reading since June and signaled only a marginal improvement in operating conditions.

Output and new orders rose only modestly, while input costs continued to rise sharply, pressuring profit margins. Firms were able to pass along slightly more of the price increases to their customers, but still had to cut staff at the fastest pace in three months to reduce costs.

Firms have had to cut staff at the fastest pace in three months to keep up with narrowing margins. /Reuters Photo.

The findings in the Caixin report contrasted with a similar official survey on Thursday which showed an unexpected pick-up in manufacturing growth last month, despite the expected drag from the air pollution crackdown and a cooling property market.

The Caixin version tends to focus more on small and mid-sized companies.

“For the most part, the manufacturing sector remained stable in November, although some signs of weakness emerged. In the fourth quarter, the economy is likely to maintain the stability observed since the start of the second half of the year,” Zhengsheng Zhong, Director of Macroeconomic Analysis at CEBM Group, said in a note accompanying the Caixin release.

“Economic growth in 2017 is expected to be higher than last year, but it may come under downward pressure in 2018,” Zhong added.

The world’s second-biggest economy has defied market expectations with economic growth of 6.9 percent in the first nine months of the year, supported by a construction boom and robust exports.

But factory activity has shown signs of cooling in the past few months as Beijing extended a crackdown on financial risks, which has increased borrowing costs and weighed on new investment.

Source(s): Reuters