Official and private institution surveys show that manufacturing activities in China contracted in November. Despite the recovery in overseas demand after the U.S.-China trade truce, the economic growth rate continued to slow down.
The U.S.-China trade war is currently in a truce state. Although new export orders have increased, the latest Purchasing Managers’ Index (PMI) data released by S&P Global on Monday, December 1st, revealed a decline in China’s manufacturing sector. The RatingDog China Manufacturing PMI dropped from 50.6 in October to 49.9 in November, marking the first deterioration in manufacturing conditions since July. The index is based on a threshold of 50, where a reading above indicates expansion, while below signifies contraction.
RatingDog noted that while new orders from overseas started to pick up, Chinese manufacturing output growth stagnated last month, and new orders also nearly stagnated.
On Sunday, November 30, data released by the National Bureau of Statistics of China showed that the official manufacturing PMI had been in a contraction phase for the eighth consecutive month. Though there was a slight improvement, the continuous decline in the number of days still reached a historical high. Among the major sub-indexes, the new export order sub-index saw the largest increase.
Despite the growth in overseas sales, stagnant domestic demand, and the continued slump in the real estate market, China’s economic growth rate has slowed to its lowest level since the last quarter of 2022. This was when China was nearing the end of its “zero-COVID” containment measures.
Yao Yu, founder of RatingDog, stated, “Although new export orders increased in November, this trend did not reverse the weakness in the manufacturing sector.”
The data from the National Bureau of Statistics also indicated that in November, non-manufacturing activities in the construction and service sectors experienced their first contraction in nearly three years.
Bloomberg reported that the PMI results showed signals of manufacturing contraction from both official and private surveys (with different sample sizes, regions, and types of enterprises). Private surveys, mainly focusing on small and export-oriented enterprises, had been relatively optimistic for most of this year. These assessments further confirmed the current weakened momentum in economic growth for this quarter, with investment witnessing an unprecedented decline and consumer demand remaining weak.
The sluggish domestic demand also cast a shadow over the outlook for Chinese factories. Retail sales growth had slowed for the fifth consecutive month in October, marking the longest continuous deceleration period since the closure of Chinese stores over four years ago during the COVID-19 pandemic.
RatingDog’s survey also revealed that due to almost stagnant new orders, manufacturers reduced their workforce. Their purchasing inventory saw the fastest decline since December 2023, marking the first decline in seven months.
According to a report by Goldman Sachs economists led by Yuting Yang, “The National Bureau of Statistics and RatingDog’s Manufacturing Purchasing Managers’ Index (PMI) in November were both below 50, indicating a slowdown in manufacturing activities.”
They emphasized that both surveys also “imply narrowing profit margins” as the input price indices of the two surveys were above 50, while the output cost index saw a decline.