China Manufacturing Sector Continues To Shrink In November

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China's manufacturing sector continued to contract in November due to the sustained reductions in output and sales, a closely watched survey showed on Thursday.

The Caixin manufacturing Purchasing Managers' Index rose moderately to 49.4 in November from 49.2 in October, data published by S&P Global revealed.

Nonetheless, the reading has remained below the 50.0 threshold for the fourth month in a row, suggesting contraction in the manufacturing sector.

Production declined for the third straight month largely reflecting the impact of COVID-19 restrictions on operations and customer demand.

New orders also dropped in November but the pace of decline was the slowest in four months. There were also reports that softer global economic conditions weighed on export sales.

The pace of job shedding was the fastest seen since the initial wave of the pandemic in February 2020. Some firms cited that workers were unable to return to work due to restrictions.

There was a renewed fall in buying activity as firms looked to cut back on purchasing due to lower production requirements. Consequently, the level of inventories declined in November.

On the price front, the survey showed that input cost inflation was the fastest since June amid reports of higher costs for some raw materials. On the other hand, selling prices dropped at the slowest pace in seven months as firms competed to retain customers.

Optimism among manufacturers improved to a three-month high as they expect pandemic to recede, allowing operations to normalize.

"Covid outbreaks have been spreading across China since October, and their impact on the economy has grown more and more obvious," Wang Zhe, senior economist at Caixin Insight Group said. "How to balance Covid controls and economic growth has once again become a core issue."

Last month, the Paris-based Organisation for Economic Co-operation and Development projected China's economic growth to rebound to 4.6 percent in 2023 from an estimated 3.3 percent this year.

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