Flash PMI drops to 48, indicating economic contraction
November 28, 2011 Category Macro-economy, Weekly
The HSBC/Markit flash purchasing managers’ index (PMI), a monthly indicator published a week before the final PMI data is released, dived to 48 in November from 51 last month. A reading above 50 means expansion, while below indicates contraction. This would put pressure on Beijing to relax some monetary measures and ease the yuan’s appreciation against the U.S. dollar to give some breathing space to struggling exporters. “Industrial production growth is likely to slow further to 11% to 12% in coming months,” HSBC’s Chief China Economist Qu Hongbin said. “Growth is set to overtake inflation as Beijing policymakers’ top policy concern.” He added that weaknesses in November’s flash PMI arose largely from sluggish demand in domestic and external markets. Manufacturing input and output prices fell faster than expected and contracted for the first time since the middle of last year. Qu said the biggest worry was that tightening measures would not be lifted fast enough and a downturn in global trade would hit growth. UBS Economist Wang Tao expects Beijing to gradually allow more bank lending and fiscal spending. Wang expected China’s credit quota to rise to CNY8 trillion next year from this year’s CNY7.3 trillion to CNY7.4 trillion. The latest Moody’s Analytics research said there was reduced expectation of yuan appreciation, based on October’s net outflow of foreign currency from China.
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