Asia Economy
Manufacturing PMI stalled in China in November; Fell in Korea, Indonesia , grew in India
By Michael Hennigan, Finfacts founder and editor
Dec 1, 2014 - 5:48 AM

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The November purchasing managers' index (PMI) for November showed that the sector stalled in China while manufacturing in South Korea and Indonesia contracted but the sector expanded in India.

China’s official PMI index, which covers large state-owned enterprises fell to 50.3 in November compared with 50.8 in October, the National Bureau of Statistics said Monday. This is its lowest level since March. Meanwhile after adjusting for seasonal factors, the HSBC PMI, using a panel of about 420 private firms – the index is a composite indicator designed to provide a single-figure snapshot of operating conditions in the manufacturing economy – posted the no-change mark of 50.0 in November, unchanged from the earlier flash reading, and signalled that operating conditions were unchanged from the previous month. Furthermore, it was the lowest index reading since May, and contrasted with improvements in each of the prior five months.

November data signalled a further loss of momentum in China’s manufacturing economy, with output declining for the first time since May, albeit marginally. Meanwhile, total new orders increased for the sixth month in a row, though the rate of growth was only modest. Data suggested that softer client demand from abroad had partly dampened overall growth of new work, with new export orders expanding at the slowest rate in five months. Meanwhile, average input costs declined sharply, which contributed to a solid reduction of output charges.

The decline in the headline index was partly driven by a renewed fall in manufacturing production in November. This was the first time that output had declined in six months, though the rate of contraction was only slight. Anecdotal evidence suggested that subdued market conditions and relatively muted client demand led firms to cut production in November. Meanwhile, total new business increased at a modest pace that was little-changed from October. However, November data indicated that foreign demand continued to soften, with the latest expansion of new export business the slowest since June.

Manufacturing employment in China continued to decline in November. The rate of job shedding was similar to that recorded in October and moderate overall. Lower output and reduced staffing levels contributed to an increased amount of backlogged work in November. That said, the rate of accumulation eased since October.

Purchasing activity was unchanged in November, thereby ending a six-month sequence of growth. Manufacturers in China meanwhile decreased their inventories of both pre- and post-production goods in November, with a number of companies attributing lower stocks to reduced production.

Average input costs fell for the fourth month in a row in November and at a sharp rate. Average prices charged meanwhile declined solidly over the month.

Hongbin Qu, chief economist, China & co-head of Asian Economic Research at HSBC said: "The HSBC China Manufacturing PMI fell to a six-month low of 50.0 in the final reading for November, down from 50.4 in October and unchanged from the flash reading. Domestic demand expanded at a sluggish pace while new export order growth eased to a five-month low. Disinflationary pressures remain strong while the labour market weakened further. Today's data suggest that the manufacturing sector lost momentum and point to weaker economic activity in November. The PBoC's rate cuts, delivered on the 21st November, will help to stabilise property and manufacturing investment in the coming months. We continue to expect further monetary and fiscal easing measures to offset downside risks to growth."

Manufacturing operating conditions in India improved for the thirteenth month in a row in November, supported by stronger growth of output and new work intakes. Foreign orders and buying activity also rose during the month, while employment remained broadly stable. However, a cautionary note was provided by survey data regarding input costs and output charges, as inflationary pressures intensified.

Rising from 51.6 to 53.3, the headline seasonally adjusted HSBC India PMI reached a 21-month peak in November. The latest improvement in business conditions was solid overall and the thirteenth in consecutive months. Consumer goods was the best performing of the broad areas monitored.

HSBC PMI data complied by Markit signalled worsening operating conditions at South Korean goods producers in November. New orders declined, alongside a further deterioration in production. Subsequently, backlogs and stocks of purchases fell, albeit at slower paces than observed in October. Staffing levels, meanwhile, decreased for the second month running and at a slightly faster pace than October. Downward pressures on selling costs and input prices remained, amid reports of increased competition and lower raw material costs.

The HSBC South Korea PMI posted a reading of 49.0 in November, slightly up from 48.7 in October. Operating conditions faced by South Korean manufacturers have now worsened for the third consecutive month, although at a slightly slower pace than the previous month.

The latest PMI data painted a bleak picture for Indonesian manufacturers in November, as operating conditions worsened at the fastest rate in the survey’s 44-month history. The overall deterioration was driven by strong contractions in output and new orders, along with a moderate reduction in employment. Meanwhile, the recent hike in fuel prices led to a sharp rise in input costs faced by goods producers in Indonesia.

The headline seasonally adjusted HSBC PMI dropped from 49.2 in October to a survey-record low of 48.0 in November. Business conditions have now worsened in three of the past four months, following an 11-month period of improvement.

Underpinning the overall deterioration in performance at Indonesian manufacturers was the fastest contraction in output since January 2012. Anecdotal evidence blamed falling demand and higher fuel prices as the principal factors behind declines in production during November.


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