Preliminary data of the HSBC/Markit PMI showed this morning that the Chinese manufacturing sector has disappointed in performance in November. The flash reading fell to 50.0 from 50.4 in October. The market expected 50.3.
Decomposition showed that the output sub-index fell to 49.5, the first contraction in six months. This is no wonder given the mass production shut down in Beijing and the surrounding provinces (heavy manufacturing provinces) in the weeks up to the APEC meeting on 11-12 November. The Chinese government did so to ensure that global leaders would be welcomed by a clear blue sky in Beijing – the so-called APEC blue.
Apart from that domestic orders picked up so the stabilising housing market has not been a large drag as feared. Export orders fell but could be seen as a correction to the previous peak.
Generally we still believe that the stabilising housing market and the export sector would lead to growth stabilization in Q4. As a result, no large-scaled stimulus will be launched and any measure to stir growth will come from the fiscal side, not monetary. It’s important to note that the government had already achieved its employment goal of creating 10 million new jobs this year, a much more crucial objective than the growth target. So there is no need to over-stimulate the economy.
Nordea