China's Manufacturing Data Grows For Fourth Straight Month

The HSBC China Composite PMI numbers announced today hinted at further expansion in the Chinese economy. Though this expansion is marginal, the output and new order growth in the month of November were at their strongest in 8 months.

At 50.8 for November, the reading moved a shade lower from that of 50.9 for October. Despite this marginal expansion (a reading above 50 indicates expansion), the reading was the second highest in the past 8 months. Chinese manufacturing grew for the fourth successive month in November and at the fastest clip since March this year. Interestingly, this growth was supported by quicker expansion of the total new business. Further, order growth was seen due to domestic demand picking up as new export orders rose at a marginal pace.

Though there was increase in volume of new business during November, a cut in staffing was seen in the manufacturing industry contrary to the slight expansion in payroll numbers in October. This caused the accumulation of backlog at the second strongest rate in the last couple of years.

However, inflationary pressures were felt by Chinese manufacturers for the fourth consecutive month, with higher raw material prices both domestically and globally. On a positive note, a few Chinese manufacturers have started passing on the higher material prices to their customers by upping their selling prices marginally.

According to Hongbin Qu, Chief Economist, Asian Economic Research at HSBC, “China’s manufacturing sector kept relatively steady growth momentum in November, as the final manufacturing PMI was revised up from the flash reading on the back of faster new business gains. However, the renewed contraction of employment and the slower pace of restocking activities call for a continuation of accommodative policy. The modest inflationary pressures leave room to do so."