China November PMIs show economy cooling, argue for more stimulus

Sun Nov 30, 2014 11:31pm EST
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BEIJING (Reuters) - Growth in China's manufacturing sector slowed in November, suggesting the world's second-largest economy is still losing momentum and adding pressure on authorities to ramp up stimulus measures after unexpectedly cutting interest rates last month.

After saying for months that China does not need any big economic stimulus, the People's Bank of China (PBOC) surprised financial markets by lowering rates on Nov. 21 to shore up growth. Analysts see more moves in coming months if the economy continues to stumble. [ID:nL3N0TB3VW]

"The PBOC's rate cut appears to have failed to improve sentiment, and we see little improvement in activity indicators in November," ANZ said in a research note.

"In order to maintain growth for the whole year at around 7.5 percent (the official target), we believe that Chinese authorities will intensify easing efforts in December to accelerate growth momentum."

The official Purchasing Managers' Index (PMI) eased to an eight-month low of 50.3 last month, the National Bureau of Statistics said on Monday, still indicating a modest expansion in activity but below forecasts for 50.6 and October's 50.8.

The official PMI survey, which is biased toward large, state-owned factories, showed that demand for Chinese goods was stronger in China than abroad. New export orders contracted.

A similar private survey showed growth at Chinese factories stalled last month. The final HSBC/Markit China Manufacturing Purchasing Managers' Index (PMI) edged down to 50 in November, a six-month low and right on the boom-bust 50-point level that separates growth from contraction on a monthly basis.

The reading was unchanged from a preliminary "flash" figure and down from the final 50.4 in October.

The HSBC survey focuses more on smaller firms, which are facing more stresses as cooling demand cuts into sales and rising borrowing costs make it tougher to pay off debts, a point the PBOC stressed when it eased rates.   Continued...

An employee works at a machine manufacturing factory in Huaibei, Anhui province, September 1, 2014. REUTERS/Stringer