© Reuters. FILE PHOTO: Steel pipes are seen stacked at an industrial park in Shenyang, Liaoning province, China September 30, 2021. REUTERS/Tingshu Wang/File Photo

BEIJING (Reuters) – China’s factory activity fell back into contraction in November as subdued demand, shrinking employment and elevated prices weighed on manufacturers, a business survey showed on Wednesday.

The Caixin/Markit Manufacturing Purchasing Managers’ Index (PMI) fell to 49.9 in November from 50.6 the month before, versus analyst expectations of 50.5 in a Reuters poll. The 50-mark separates growth from contraction on a monthly basis.

The world’s second-largest economy, which staged an impressive rebound from last year’s pandemic slump, has lost momentum since the second half as it grapples with a slowing manufacturing sector, debt problems in the property market and COVID-19 outbreaks.

Analysts expect the slowdown in 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.

The findings from the private survey, which focuses more on small firms in coastal regions, stood in contrast with those in an official survey on Tuesday that showed manufacturing activity grew for the first time in three months.

“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 accompanying the data release.

“But demand was relatively weak, suppressed by the COVID-19 epidemic and rising product prices.”

Production in November expanded for the first time in four months, while new orders slid back into contraction, the Caixin survey showed.

Declines in employment also deepened.

Cost pressures are finally easing after the relentless build-up in the past few months as government efforts to curb record high raw material prices paid off.

A sub-index for input prices declined to 52.3 from 65.1 the previous month, driving a slowdown in output price inflation.

Firms reported prices of steel fell at a steep pace in November, while the prices of chemicals and electronics remained high, the survey showed.

Wang from Caixin Insight Group urged policymakers to focus on supporting small companies and pay attention to problems including deteriorating employment, limited household income growth and weak purchasing power for consumer goods.

“In addition, the prices of some raw materials remained high. Enterprises are still facing high cost pressures. Policymakers should treat inflation seriously.”

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Source: Investor


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