China’s Manufacturing PMI above Expectations
By Suyang Zhou - Research Analyst
China's manufacturing and non-manufacturing PMI increased by 0.2 ppt and 0.5 ppt to 51.8% and 54.8%, respectively in Nov 2017, as both indices remained in expansionary territory (>50%).
Manufacturing PMI edged up due to recovery from demand and supply. New orders (53.6%) and production (54.3%) climbed 0.7 ppt and 0.9 ppt, respectively from October levels. Raw material purchasing cost index declined further to 59.8%.
Looking into manufacturing PMI by enterprise category, PMI in large enterprises decreased 0.2 ppt to 52.9%. While PMIs in medium- and small-sized enterprises recovered and went up 0.7 and 0.8 ppt to 50.5% and 49.8%, respectively.
Drilling into the composition of manufacturing PMI, production (54.3%) and new orders (53.6%) were major drivers that stayed above breakeven point. Material inventory dropped down 1.6 ppt to 48.4%, indicating depletion of material inventories was faster than the previous month. Meanwhile, employment (48.8%) and supplier deliveries (49.5%) were laggards due to inactive hiring and longer delivery time of raw materials in the manufacturing industry.
Domestic orders, as is measured by the difference between new orders and new export orders, kept flat compared to last month. But the level was still higher than August’s 2.7%, indicating resilient domestic demand.
Irrespective of this, the difference between material and finished goods inventory, the so-called manufacturers' willingness of re-stocking was also trending down in November due to prominent decline in materials inventory.
Last but not the least, leading indicators of producer price index (PPI), output and input prices began to decrease for the last two consecutive months. This implies that the upcoming PPI for November could lose growth momentum.