Factory activity in China contracted in November following a fall in employment rates, reduced demands and rising prices weighing on manufacturers, showed a business survey the results of which were released on Wednesday.
The Caixin/Markit Manufacturing Purchasing Managers’ Index (PMI) fell to 49.9 in November, down from 50.6 a month earlier, against analysts’ expectations of 50.5.
The 50-mark separates growth from contraction on a monthly basis.
China, which has the world’s second-largest economy, from where the pandemic began staged an impressive rebound from last year’s pandemic slump, appears to have lost momentum since the second half of this year as it grapples with a slowdown in the manufacturing sector; huge debts in its property market and COVID-19 outbreaks is weighing down the Chinese economy.
Analysts expect the slowdown to impact China’s gross domestic product (GDP) seen in the third-quarter to continue in the fourth with demand expected to remain soft given the prolonged global COVID-19 pandemic.
“Supply in the manufacturing sector recovered, while demand weakened. Relaxing constraints on the supply side, especially the easing of the power crunch, quickened the pace of production recovery,” said Wang Zhe, senior economist at Caixin Insight Group, in a statement. “But demand was relatively weak, suppressed by the COVID-19 epidemic and rising product prices.”
The decline in employment numbers has also deepened.
While prices of steel have fallen steeply in November, prices of chemicals and electronics components continue to remain high, as per the results of the survey.
“In addition, the prices of some raw materials remained high. Enterprises are still facing high cost pressures. Policymakers should treat inflation seriously,” said Wang from Caixin Insight Group.