China’s factory activity contracted for a second straight month in November, while non-manufacturing activity hit yet another new low for the year, signaling that the world’s second-largest economy is not yet out of the woods and may require more muscular policy support.
The official manufacturing purchasing managers’ index unexpectedly fell slightly to 49.4 in November from 49.5 in October, according to data from the National Bureau of Statistics released Thursday. This was slightly worse than the median forecast for 49.7 in a Reuters poll. China’s official manufacturing PMI also came in below forecast last month.
The official non-manufacturing managers’ index slipped to 50.2 in November from 50.6 in October, according to the same NBS release. This was the weakest reading since December 2022.
A PMI reading above 50 indicates expansion in activity, while a reading below that level points to a contraction.
“Survey results show that more than 60% of manufacturing companies reported insufficient market demand. Insufficient market demand is still the primary difficulty affecting the current recovery and development of the manufacturing industry,” Zhao Qinghe, a senior statistician at the Service Industry Survey Center of the National Bureau of Statistics, said in a separate statement.
While three of the five sub-indexes for the manufacturing PMI declined in November from a month ago, there were some encouraging green shoots in the sub-indexes for the manufacturing PMI. High tech and equipment manufacturing both recorded expansions.
NBS also reported that business confidence is improving, with the the expectation index for production and operating activities in manufacturing standing at 55.8 even as the sub-indexes for new orders and production slipped slightly.
In the non-manufacturing sectors, weakness in the service industries outweighed strength in construction. In particular, the business activity index of industries such as real estate, leasing, and business services stayed below 50, pointing to further contraction.
While China’s third-quarter economic growth came in stronger than expected, economic data has been patchy and uneven, pointing to the fragility in its vast economy as Beijing engineers a deleveraging of the once-bloated real estate sector.