Weak PMI Could Force PBOC To Inject Ease Further

December 1, 2014 Share Print 0

China’s factory activity continued to lose momentum in November, two surveys showed on Monday, underscoring the challenges manufacturers face amid a cooling economy and prompting talk of further aggressive intervention from authorities.

The official Purchasing Managers’ Index (PMI) fell to an eight-month low of 50.3, missing a forecast in a Reuters poll for a 50.6 and down from the 50.8 reading in October.

The HSBC final PMI reading for November, meanwhile, was unchanged from an initial six-month low reading of 50.0, which is right at the breakeven level that separates expansion from contraction.

The official PMI is focused on larger state-owned factories, while the HSBC survey tends to apply to smaller manufacturers in the private sector.

“November’s data signaled a further loss of momentum in China’s manufacturing economy, with output declining for the first time since May, albeit marginally,” wrote Hongbin Qu, chief China economist & co-head of Asian Economic Research at HSBC.

“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,” he added.

China’s slowing economy spurred the central bank (PBOC) into action last month, easing interest rates for the first time in more than two years. The one-year lending rate was cut by 40 basis points to 5.6 percent and the one-year deposit rate was lowered by 25 basis points to 2.75 percent.

via CNBC

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Alfonso Esparza

Senior Currency Analyst at Market Pulse

Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.