China’s official PMI indicated expansion during November, but the new orders sub-index lost ground and there are signs that GDP growth rates will slow this quarter, according to analysts.
The official November PMI was unchanged from October at 51.4, with a score of above 50 indicating growth.
The output and finished goods inventory sub-indexes both rose compared to October, up 0.1 to 54.5 and 2.33 to 47.9, respectively, suggesting increased production has not been met by demand, according to Nomura analyst Wendy Chen.
The official new orders sub-index was down 0.2 last month compared to October at 52.3, while the while the new export orders sub-component rose 0.2pp to 50.6 over the same period, an indication that domestic demand has been weakening.
“We expect exports growth to slow to 4.0 percent year-on-year in November from 5.6 percent in October, as new export orders for medium and small firms are still contracting and Korean export growth slowed significantly in October,” Chen said.
“We also believe imports growth slowed to 5.0 percent year-on-year in November from 7.6 percent in October, resulting in a trade surplus of US$18.8 billion,” she said.
The rival HSBC PMI index issued yesterday also indicated further economic growth in China at 50.8. Although lower than the 50.9 recorded in October, it was still the second highest reading in eight months.
Like the official index, it revealed a stable output index, but differed by reporting a marginal increase in new orders to 51.7 and a 0.5 month-on-month decline in finished goods inventory, which fell to 49.7.
“November data signaled a further improvement of operating conditions in China’s manufacturing sector, albeit marginal,” said HSBC in a statement. “Output and new order growth both increased at their strongest rates in eight months in November, but renewed job shedding led to a solid increase in outstanding business.”
“Production levels at Chinese manufacturers increased for the fourth month running in November, and at the fastest rate since March. Growth was supported by a quicker expansion of total new business. That was despite new export orders rising at a fractional pace, suggesting that new order growth was largely driven by domestic demand.”
Nomura forecasts that China’s GDP growth peaked in 2013 at the 7.8 percent gain recorded in the third quarter and will slow to 7.5 percent in the fourth quarter, before sliding to 6.9 percent in 2014.