**China’s Factory Activity Show Second Straight Month of Contraction**
*Official PMI Data*
In November, China’s factory activity contracted for the second month in a row, while non-manufacturing activity hit a new low for the year. This is seen as a signal that the world’s second-largest economy is still in need of strong policy support.
**Disappointing PMI Data**
According to data from the National Bureau of Statistics, China’s official manufacturing purchasing managers’ index unexpectedly fell slightly to 49.4 in November from 49.5 in October. This was worse than the median forecast for 49.7 in a Reuters poll. Similarly, the official non-manufacturing managers’ index slipped to 50.2 in November from 50.6 in October, marking its weakest reading since December 2022. A PMI reading above 50 indicates expansion in activity, while a reading below that level points to a contraction.
**Insight from the Survey**
More than 60% of manufacturing companies reported insufficient market demand, which is still the primary difficulty affecting the current recovery and development of the manufacturing industry, according to Zhao Qinghe, a senior statistician at the Service Industry Survey Center of the National Bureau of Statistics.
**Encouraging Green Shoots and Business Confidence**
While three of the five sub-indexes for the manufacturing PMI declined in November, there were some positive signs in the form of expansions in high tech and equipment manufacturing. NBS also reported that business confidence is improving, with the expectation index for production and operating activities in manufacturing standing at 55.8, even as the sub-indexes for new orders and production slipped slightly.
**Weakness in Non-Manufacturing Sectors**
The non-manufacturing sectors showed weakness in the service industries, with the business activity index of industries such as real estate, leasing and business services staying below 50, pointing to further contraction. This is in line with the fragility in its vast economy as Beijing engineers a deleveraging of the once-bloated real estate sector.
While China’s third-quarter economic growth was stronger than expected, economic data has been inconsistent and uneven, signaling the fragility of its economy. This in turn suggests that more policy support may be necessary for China to fully recover.