The November PMI from the Markit’s Nikkei Malaysia Manufacturing Purchasing Managers’ Index was 47.0, down from 48.1 in October, as the overall contraction reflected declines in four out of five PMI components – production, new orders, employment and stocks of input. While containing several encouraging elements for China bulls who had predicted a fourth-quarter turnaround, the survey pointed to an economy that is still struggling on a number of fronts, with no significant recovery in sight. A solid report would cement expectations that the US Federal Reserve is on track to increase interest rates this month for the first time in almost a decade.
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The government is trying to move China from an export-driven economy to a consumption-based one.
A separate survey conducted by Chinese media group Caixin showed manufacturing PMI at 48.6 in November, an improvement from 48.3 in October.
“The slowdown in growth combined with weak inflationary pressures support further rate cuts”, Ms. De Lima said. “The latest PMI data showed slower increases in incoming new business and output, while subdued demand growth led firms to keep workforce numbers broadly unchanged”, as per the survey.
The sub-index for new orders- a proxy for domestic and foreign demand- fell to 49.8 in November from October’s 50.3. Companies continued to shed workers, albeit at the slowest pace since May.
With financial markets on edge ahead of any fallout from the Fed’s decision this month, Asian central banks are for the most part staying pat for now while hinting there is room to ease policy further if conditions do not improve next year.
Market sentiment remained shaky due to the resumption of IPOs, renewed efforts by the securities regulator to clamp down on leveraged buying and concerns about the cooling economy.
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In India, where the economy is now growing faster than China’s, after expanding by 7.4% year on year in the third quarter, the central bank was also expected to leave rates on hold when it meets later on Tuesday.
