Chinese factories slip deeper into contraction, more policy support likely
By Joe Cash
BEIJING (Reuters) -China's manufacturing activity contracted for a second straight month in November and at a quicker pace, suggesting more stimulus will be needed to shore up economic growth and restore confidence that the authorities can ably support industry.
Better-than-expected data for the third quarter led many banks to upgrade their growth forecasts for the world's second-largest economy, but despite a flurry of policy support measures negative sentiment among factory managers appears to have become entrenched in the face of weak demand both at home and abroad.
The official purchasing managers' index (PMI) fell to 49.4 in November from 49.5 in October, staying below the 50-point level demarcating contraction from expansion, data from the National Bureau of Statistics showed on Thursday. It missed a forecast of 49.7, and only Goldman Sachs and Standard Chartered (OTC:SCBFF) predicted it would come in so low out of 31 respondents.
The new orders sub index contracted for a second consecutive month, while the new export orders component extended its decline for a ninth month.
«Today's PMI reading will further raise expectations towards policy support,» said Zhou Hao, economist at Guotai Junan International. «Fiscal policy will be under the spotlight and take centre stage over the coming year and will be closely monitored by the market.»
China's economy has struggled this year to mount a strong post-pandemic recovery, held back by a deepening crisis in the property market, local government debt risks, slow global growth and geopolitical tensions.
Factory PMI has contracted for seven out of the past eight months — rising above the 50-point mark only in September. The last time the indicator was negative
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