BEIJING (AFP) – Manufacturing activity in China stagnated in November, British banking giant HSBC said Thursday, warning of “significant” pressures on the world’s second-largest economy as its key purchasing managers’ index (PMI) hit a six-month low.
HSBC’s preliminary PMI for the month came in at the 50.0 breakeven point dividing expansion and contraction, the bank said in a statement.
It was lower than October’s 50.4 and was the weakest reading since May’s 49.4, according to the bank’s data.
The index tracks activity in China’s factories and workshops and is a closely watched indicator of the health of the economy, a key driver of global growth.
Protracted easing in new export order growth led output to contract for the first time in six months, while lingering deflationary pressures suggested domestic demand remained insufficient, Qu Hongbin, HSBC’s economist in Hong Kong, said in the statement.
“Furthermore, we still see uncertainties in the months ahead from the property market and on the export front,” he said.
“We think growth still faces significant downward pressures, and more monetary and fiscal easing measures should be deployed.”
Julian Evans-Pritchard, an analyst with research firm Capital Economics, also warned of persistent uncertainties in the economy.
“With the outlook for investment still downbeat and policymakers unlikely to intervene heavily to shore up activity in the near term given the healthy labour market, we still expect growth to slow further over the coming quarters,” he wrote in a note.
China’s economy expanded 7.3 per cent in the third quarter, lower than the 7.5 per cent expansion in the previous three months and the slowest since the depths of the global financial crisis, the government announced in October.
Statistics for October released last week pointed to persistent weakness, with growth in industrial production, which measures output at factories, workshops and mines, decelerating from a month ago and coming in below expectations.
Fixed asset investment, which gauges government spending on infrastructure, also expanded at a slower rate in the first 10 months than the January-September period, official data showed. Beijing’s 2014 growth target is about 7.5 per cent, the same as last year, although officials including Premier Li Keqiang have openly stated a slightly lower increase is tolerable as long as the job market remains resilient.
The HSBC survey, compiled by information services provider Markit, showed its employment component contracted at a faster pace this month than in October.
Chinese authorities have since April used a series of limited measures to underpin growth, including targeted cuts in reserve requirements – the amount of funds banks must put aside – and a 500 billion yuan ($81.7 billion) injection into the country’s five biggest banks for re-lending.
HSBC said the final PMI for this month will be published on December 1.