HONG KONG (MarketWatch) — Rival manufacturing surveys released Thursday confirmed manufacturing activity in China slipped into contraction in November, with the grim conditions now seen as pushing Beijing towards monetary-policy easing to support growth.
The state-sponsored China Federation of Logistics & Planning reported its manufacturing Purchasing Managers’ Index fell to 49.0 on a 100 point scale, falling below the previous month’s 50.4 reading.
The result missed a 49.7 forecast from a Dow Jones Newswires survey.
Meanwhile, HSBC’s privately compiled China PMI dropped to 47.7, weaker than its initial reading of 48 released late last month, and indicating a deterioration of conditions from October’s reading of 51.
Analysts at IHS Global described the official PMI pointing to contraction as “shocking,” while HSBC’s economists described their own China PMI as indicating a “sharp deterioration” in business conditions.
Both survey results printed below the key 50 level that separates contraction from expansion, with HSBC’s result the weakest since March 2009, while the CFLP’s PMI was negative for the first time since February 2009.
Manufacturing output and new business orders were down sharply, while both input and output prices were falling at their fastest pace since March 2009, HSBC’s survey found.
Optimism check
IHS Global Insights China analyst Alistair Thornton said the result showed the Chinese economy was slowing much faster than had been expected, and that the cooling would be seen in weaker industrial production figures for November and slowing gross domestic product growth in the fourth quarter.
“This should provide a check on yesterday’s unbridled optimism in global markets,” Thornton said.
He linked the downbeat PMI reading to the central bank’s easing of required reserves for major lenders late Wednesday, saying: “The government has stepped into the ring. The loosening campaign has begun.”
HSBC economist Hongbin Qu also saw the data suggesting a reversal in Chinese policy, saying: “Growth is set to overtake inflation as Beijing’s top policy concern. This is likely to invite an across-the-board policy easing, which is likely to come as early as year-end.”
However, the HSBC survey did have a few bright spots, with new export business received by manufacturers picking up in November, while overall employment numbers rose fractionally.
Chris Oliver is MarketWatch's Asia bureau chief, based in Hong Kong.http://www.marketwatch.com/story/china-manufacturing-slowing-data-show-2011-11-30?link=MW_latest_news
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