China's manufacturing activity falls to 6-month low, prompting Beijing to act

Source: Dukascopy Bank SA
"We think growth still faces significant downward pressures, and more monetary and fiscal easing measures should be deployed"
- Hongbin Qu, economist at HSBC

Activity in China's manufacturing sector slowed in November, with output falling and deflationary pressures increasing, underscoring weak demand in the Asian economy. HSBC flash PMI reading dropped to 50.0 in the reported month, the lowest level in six months, increasing pressure on the Chinese government to take further steps to spur growth in the world's second biggest economy. In October the gauge came in at 50.4, with a reading above 50 indicating expansion in the sector. Manufacturing data is the latest in a streak of softer indicators in recent weeks. GDP growth slowed to 7.3% on year in the third quarter, the slowest pace in more than five years, amid weaker credit and investment growth, as well as a property slump.  

Undermined by a cooling property sector, erratic demand from overseas and slackening domestic investment growth, China's economy is expected posting its weakest annual growth in 24 years this year at 7.4%. To reenergize the economy, Beijing has rolled out a steady stream of stimulus since April attempting to support flagging growth. Chinese authorities are likely to maintain their current targeted fiscal and monetary policy approach, although pressure is building to take more decisive steps, including an interest-rate cut or a reduction in the capital reserves that financial institutions must hold with the central bank. 

© Dukascopy Bank SA

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