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China’s factory activity seen contracting for seventh month on trade pressure: Reuters poll

BEIJING (Reuters) – China’s factory activity is expected to have contracted for the seventh straight month in November amid sluggish domestic demand a Reuters poll showed, despite some optimism over chances for an interim deal to de-escalate a trade war with the United States.

FILE PHOTO: Skyscrapers in the Central Business District (CBD) are reflected in a window in Beijing, China March 4, 2019. REUTERS/Thomas Peter/File Photo

The official Purchasing Managers’ Index (PMI) for November is expected to come in at 49.5, below the 50-point mark that separates expansion from contraction on a monthly basis, according to the median forecasts of 28 economists.

The reading would be higher than October’s 49.3.

The continued downturn in manufacturing activity points to further weakness in the world’s second-biggest economy, fuelling expectations the authorities will have to roll out more stimulus measures to avert a sharper slowdown and job losses.

China’s full-year economic growth is expected to slow to 6.2% in 2019 and cool further to 5.9% in 2020, according to a Reuters poll, underlining growing challenges faced by Beijing even as it steps up stimulus amid the bruising trade war.

China’s exports and imports contracted less than expected in October.

But even if a U.S.-China trade deal is signed soon, economists say it is unlikely to help boost exports and manufacturing for some time yet and could still mean more stimulus is needed from Beijing.

The United States and China are close to agreement on the first phase of a trade deal after top negotiators from the two countries spoke by phone and agreed to keep working on remaining issues.

China lowered its lending benchmark rate in November, as widely expected, to reduce company funding costs and shore up an economy hurt by slowing demand and U.S. trade tariffs.

A private business survey – the Caixin/Markit Manufacturing Purchasing Managers’ Index (PMI) – which analysts say focuses more on small- and medium-sized, export-driven Chinese firms – is expected to show factory activity expanded in November.

But it is still forecast to show more subdued growth in the sector as the reading is seen to edge lower to 51.4 from 51.7 in October.

The official PMI and its sister survey on the services sector will be released on Saturday.

The Caixin manufacturing PMI will be published on Dec.2 and the Caixin services PMI survey will be out on Dec.4.

Reporting by Beijing Monitoring Desk; Editing by Simon Cameron-Moore

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