China’s November plant activity is likely to shrink at a slower pace

BEIJING (Reuters) – China’s plant activity is expected to slow at a slower pace in November due to easing supply barriers and power cuts, a Reuters poll showed, but sustained smoothness in the manufacturing sector indicates further economic slowdown.

The official Manufacturing Purchasing Managers Index (PMI) is expected to rise to 49.6 in November from 49.2 in October, according to the average forecast of 29 economists surveyed by Reuters on Monday. A reading below 50 indicates a contraction from the previous month.

Analysts have blamed lower shrinkage on rising post-holiday production and easing power cuts in most parts of the nation, despite factors that continue to hamper high commodity prices, a slowdown in the real estate sector and a shortage of supplies. Recovery of COVID.

“We expect the NBS manufacturing PMI to shrink in November at 49.6, compared to the previous 49.2, as evidenced by the fact that the manufacturing operating rate of the heavy industry is still weak,” said Jian Chang, China’s chief economist. Barclays (LON :), in a Friday note.

The world’s second-largest economy, which had a spectacular rebound from last year’s pandemic crisis, has lost strength since the second half, facing a slowed manufacturing sector, real estate market debt problems and COVID-19 outbreaks. Analysts expect growth in gross domestic product (GDP) to slow in the fourth quarter.

Electricity cuts have been eased by political leaders to reduce coal prices against records. The State Grid Corporation said on November 7 that electricity rationing has been completed in most parts of the nation, with the exception of some provinces with temporary restrictions on high-emission industries.

Premier Li Keqiang admitted last week that the Chinese economy is facing new downward pressures, but said authorities should avoid a one-size-fits-all “aggressive” approach.

China’s central bank is likely to be cautious about releasing monetary policy to boost the economy, as economic growth slows and rising factory inflation worries about stagflation, policy sources said.

Factory door inflation hit a 26-year high in October, further tightening profit margins for producers and raising concerns about stagflation.

The official PMI, which focuses largely on large companies and state employers, and its sister survey on the services sector will be released on Tuesday.

Caixin’s private manufacturing PMI will be released on Wednesday. Analysts expect headline readings to fall slightly from the previous month’s 50.6 to 50.5.