November’s survey data indicated that operating conditions within the Chinese manufacturing sector worsened for a fourth successive month. The headline CLSA China Manufacturing Purchasing Managers’ Index was at 40.9, down from 45.2 in the previous month, to record a new survey low.
Production at firms operating in the Chinese manufacturing economy contracted at the sharpest rate in the survey history during November. Firms generally attributed the latest fall to lower new workloads, reflecting fears of a protracted economic downturn and uncertainty in financial markets.
The level of new business received by Chinese manufacturers fell for the fourth month in succession during the month. Anecdotal evidence indicated that the deepening financial crisis and adverse demand conditions had significantly contributed to November’s survey low reading.
In line with new business, export order receipts declined at the sharpest rate since the inception of the series. Companies widely commented that the bleak economic environment and poor demand were principal reasons contributing to the latest fall. Declining new order volumes prompted firms to clear existing contracts at the fastest rate in the survey history in November. Levels of work-in-hand (but not yet completed) have now fallen in each of the past four months.
In November, staffing levels at firms in the Chinese manufacturing sector fell at the steepest pace since the series began. Firms continued to reduce their labor overheads by halting recruitment and shedding jobs.
Average input costs fell at a survey-record pace in November, reflecting stagnant market conditions and fears of a prolonged economic downturn. Data indicated that output charges fell at a series-record rate and for the third month in succession during November. Survey responses linked the latest decrease to uncertain economic conditions and lower input costs.
Commenting on the China Manufacturing PMI survey, Eric Fishwick, head of economic research at CLSA, said: “Another grim month for China manufacturing and the first in which the weakness in overseas demand overtook what, until now, has been mainly a domestic slowdown. Export orders will weaken further and we expect further cuts in production and employment. Costs are plummeting but the benefit to margins is being offset by output price cuts as businesses try to protect market share.”
