Chinese factories’ activity is growing at the fastest pace for more than three years

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BEIJING (Reuters) – Chinese factory activity grew at the fastest pace for more than three years in November, while growth in the service sector also peaked for several years, as the recovery The country’s economy after the coronavirus pandemic has intensified.

FILE PHOTO: An employee works on a steel structure production line at a factory in Huzhou, Zhejiang province, China, May 17, 2020. China Daily via REUTERS

Optimistic data released on Monday suggests the world’s second-largest economy is on track to become the first to completely shake off the trail of widespread industry shutdowns, with recent production data showing manufacturing now at pre-pandemic levels.

China’s official manufacturing purchasing managers (PMI) index rose to 52.1 in November, from 51.4 in October, according to data from the National Bureau of Statistics. It was the highest PMI reading since September 2017 and remained above the 50 point mark that separates growth from contraction on a monthly basis. It was also above the median forecast of 51.5 in a Reuters survey of analysts.

“The rise in the manufacturing PMI in November, with widespread improvements in the sub-indices, suggests that the momentum of recovery in the industrial sector has become more certain,” Zhang Liqun, analyst at the China Logistics and Purchasing Federation.

“But the results also showed that inadequate demand is still a common problem facing businesses. We need to consolidate political support aimed at increasing domestic demand. “

China’s blue-chip stock index hit a 5-1 / 2 year high after the good data.

The robust overall PMI points to solid fourth quarter growth, which Nomura analysts expect to accelerate to 5.7% year-over-year from 4.9% in the third quarter, an impressive turnaround after the deep contraction at the start of the year.

The economy is expected to grow by around 2% for the full year, the weakest in more than three decades, but still much stronger than other large economies struggling to bring their coronavirus outbreaks under control.

The official PMI, which largely focuses on large corporations and state-owned enterprises, showed the new export orders sub-index to be 51.5 in November, down from 51.0 a month earlier. This bodes well for the export sector, which has benefited from strong foreign demand for medical supplies and electronics.

Strong e-commerce shopping promotions also contributed to activity in November, triggering strong consumer demand and boosting confidence among small and medium-sized businesses.

But a surge in the yuan and further lockdowns among many of its major trading partners could put pressure on Chinese exports, which have been surprisingly resilient so far.

More companies have reported the impact of currency fluctuations compared to a month ago, said Zhao Qinghe, senior statistician at NBS.

“Some companies have reported that as the yuan continues to rise, corporate profits are under pressure and export orders are declining,” Zhao said.

He added that the recovery in manufacturing industry as a whole remained uneven. For example, the PMI of the textile industry remained below the threshold of 50 points, indicating weak commercial activity.

RETURN OF CONSUMERS

In the service sector, activity increased for the ninth consecutive month. The official non-manufacturing purchasing managers (PMI) index rose to 56.4, the fastest since June 2012 and to 56.2 in October, as consumer confidence accelerated amid a few infections in the COVID-19.

Rail and air transport, telecommunications and satellite services and the financial sector were among the best performing sectors in November.

A sub-index of construction activity stood at 60.5 in November, from 59.8 in October, as China ramps up spending on infrastructure to boost its economy.

Monday’s data also showed that the job market still faces tensions. Service companies slashed payrolls at a faster pace in November, data showed, while factories cut staff for the seventh month in a row, albeit at a slower pace.

“The continued recovery reduces the need for further monetary easing, but any change to tightening is also unlikely given continued labor market pressure,” said Erin Xin, Greater China Economist at HSBC.

Reporting by Stella Qiu and Ryan Woo; Additional reports by Colin Qian; Editing by Sam Holmes and Lincoln Feast

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