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December 3, 2019

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PMI edges up to 51.8 fueled by new orders

Chinese manufacturing activity accelerated in November from a month earlier, with new export orders seeing the first back-to-back monthly rise for over 18 months.

The seasonally adjusted Caixin China General Manufacturing Purchasing Managers’ Index edged up to 51.8 last month from 51.7 in October, the highest since December 2016, Caixin magazine and research firm Markit said.

A reading above 50 signals growth, while below 50 points to contraction.

The Caixin PMI is a private survey focusing on smaller businesses and offers a first glimpse into the operating environment. It is closely watched as an alternative to the official PMI.

China’s official manufacturing PMI, released on Saturday, climbed 0.9 points to 50.2 in November from the previous month, to be the second-highest in 2019.

The rising PMI data signaled a further modest improvement in the health of China’s manufacturing sector in November.

The latest upturn in the sector was partly due to a rise in orders for Chinese manufacturers, according to Zhong Zhengsheng, director of macro-economic analysis at CEBM Group.

Despite easing from October, the rate of new order growth remained solid overall, with a number of firms citing firmer underlying demand conditions. Demand from overseas also improved, with export sales picking up for the second month in a row. Though only marginal, it marked the first back-to-back increase in new orders from abroad since early 2018, the report said.

In response to rising new workloads, manufacturers increased output again in November. The rate of expansion was little changed from that seen in October and solid.

The employment subindex, meanwhile, rebounded into positive territory after falling for seven months in a row, marking its second expansion this year.

To accommodate higher production, firms increased their buying activity and at the strongest pace since January 2018, the report showed. This placed further pressure on supply chains, with firms registering a deterioration in vendor performance again in November.

Higher buying activity contributed to an increase in stocks of purchases, albeit only marginal. Meanwhile, inventories of finished goods fell slightly.


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