Manufacturing Activity Expands at Fastest Pace in Almost Three Years

Darnell Taylor
December 2, 2019

A gauge of China's manufacturing sector jumped unexpectedly last month, signaling a recovery in activity amid government support and a stabilizing global economy.

The Caixin/Markit Manufacturing Purchasing Managers' Index (PMI) index rose to 51.8 in November from 51.7 in the previous month. It stayed well above the 50-point mark that separates growth from contraction.

The official factory gauge pointed to an improvement in China's vast manufacturing sector last month. But growth has been generally cooling over the past year amid a broader slowdown, which is making businesses and consumers more cautious on spending.

China has asked local governments to speed up the issuance of 1 trillion yuan of debt earmarked for infrastructure such as roads, water conservancy and healthcare facilities, so that the proceeds can be invested early in 2020 to help shore up the slowing economy.

But the latest report also says the manufacturing sector is still facing downward pressure.

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Zhang attributed to the better-than-expected November PMI to a government push on infrastructure investment, less property market control, and a de-escalation in US-China trade tension in October, when both sides said they had substantially reached a "Phase 1" agreement and the United States delayed a tariff increase scheduled to take place on October 15.

The sub-index for production and new orders rose to 52.6 and 51.3 in November, up 1.8 and 1.7 percentage points from October, respectively - the highest since the second half of the year.

The Caixin survey showed total new orders and factory production remained at buoyant levels in November, although they both eased slightly from record highs in the previous month, when they grew the fastest in over six years and almost three years, respectively. This reflects concerns about the prolonged trade negotiations, and Washington's recent passing of a law supporting human rights and democracy in Hong Kong.

Beijing's drive to guide more bank lending towards small private firms appeared to be working.

NBS data also shows that the PMI for China's non-manufacturing sector came in at 54.4 in November, the highest since April, up from 52.8 in October, indicating that the non-manufacturing industry maintained its overall expansion momentum. However, the sector's resilience weakened late previous year amid a broader economic slowdown.

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