China’s manufacturing conditions slipped to the weakest level in more than three years as sluggishness in the nation’s old growth drivers adds to risks facing the government’s growth target.
The official purchasing managers index fell to 49.6 in November, the National Bureau of Statistics said Tuesday — the weakest level since August 2012. That compared with a median estimate of 49.8 in a Bloomberg survey of economists, which was also the level for September and October. The non-manufacturing PMI rose to 53.6 from 53.1 a month earlier. Numbers below 50 indicate deterioration.
Six central bank interest rate cuts in a year haven’t been enough to spur a recovery in manufacturing as a property downturn and industrial overcapacity weigh on the sector. Premier Li Keqiang’s goal of about 7 percent expansion for 2015 is at risk, even as employment has held up thanks to resilience in services industries.
The Shanghai Composite Index was 0.2 percent lower at 9:35 a.m. local time. The onshore yuan — which won approval Monday for addition to the IMF’s list of reserve currencies — was little changed after the data.
Readings of output, new orders, inventories and employment all weakened from October, the manufacturing PMI report showed.
A range of private indicators for November had suggested conditions remained weak for China’s industrial sector. A privately compiled PMI and a gauge based on search engine interest in small and medium-sized businesses deteriorated last month, while a sentiment indicator dropped sharply from October.
“The steel sector in China continues to come under overcapacity pressures as well as declining demand on the back of slumping property investment,” according to a recent report by Liu Li-Gang, head of China economics at Australia & New Zealand Banking Group Ltd. in Hong Kong.
To combat the downturn, the People’s Bank of China has cut benchmark borrowing costs to a record low and is adding funds to the banking system as it moves to a new monetary framework.
“Substantial policy support has yet to make the economy any better, though it has at least stopped it from getting worse,” Bloomberg Intelligence economists Tom Orlik and Fielding Chen wrote in a note. “Policy will remain supportive, including further rate cuts in 2016 and amped up fiscal spending. Accelerated easing is not yet called for.”