China’s November factory activity likely contracted for the second month; Reuters’ survey on Wednesday indicated that China’s manufacturing activity most likely decreased for the second consecutive month in November. This finding keeps calls for further stimulus measures alive as factory owners struggle to find domestic and international orders.
Despite expectations for the official purchasing managers’ index (PMI) to have increased to 49.7 in November from its unexpected decrease to 49.5 the previous month, the consensus forecast of 31 economists expressed in a Reuters survey indicates that the index will continue to be below the 50-point threshold that separates contraction from expansion.
All respondents returned numbers that fell between 49.0 and 50.2; the majority predicted a minor decrease between 49.6 and 49.8. This indicates that economists agree that the economy is still primarily battling for traction, even though some evidence of green shoots is in mixed data from October.
The world’s second-largest economy has been unable to establish a robust post-COVID recovery this year because of a profound housing market crisis, dangers associated with local government debt, poor global growth, and geopolitical concerns. All of these factors have prevented the economy from gaining speed.
As a result of the fact that a flurry of policy assistance measures has only had a minor effect, the authorities are under increasing pressure to implement further stimulus.
Following an increase of 11.9% in September and a gain of 17.2% in August, which experts attributed to fluctuating input costs, profit growth in China’s industrial businesses shrank back to the low single digits last month. This comes after the growth recorded in September and August. During October, there was a decrease in both new export and import orders.
The sluggish recovery has caused many observers to warn that China may begin flirting with stagnation similar to Japan’s later this decade if officials do not try to reposition the economy toward higher levels of family spending and market allocation of resources.
On Tuesday, the governor of China’s central bank stated that he was “confident that China will enjoy healthy and sustainable growth in 2024 and beyond.” Still, he also encouraged structural changes to lessen the country’s reliance on infrastructure and property for growth.
For the government to maintain an annual economic growth target of “around 5%” in the following year, which would be identical to the goal for this year, policy experts have stated that further stimulus will be required.
Thursday is the day when the official PMI will be made available. Analysts anticipate that the private Caixin manufacturing survey will be released on Friday, and they anticipate that its reading will increase slightly from 49.5 in October to 49.8.
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