November manufacturing PMI reading was 48.6, up slightly from 48.3 in October. The manufacturing sector has now worsened in each of the past nine months. However, the latest deterioration was the weakest seen since June. Total new work continued to decline, and at a similarly modest rate to that seen in October, despite a pickup in new export business growth. Relatively soft overall client demand led firms to scale back their purchasing activity again in November, while inventories also declined. Deflationary pressures intensified over the month, as highlighted by sharper decreases in both input costs and output prices.
The rate at which new orders declined was similar to that seen in October and moderate overall. Data indicated that weaker domestic demand had acted as a drag on new order books, as new export business expanded in November and at the quickest rate in 13 months. According to panelists, improved foreign client demand boosted new work from abroad.
Reflective of lower overall workloads, Chinese manufacturers reduced their purchasing activity again in November. That said, the pace of decline was the weakest in the current five-month sequence. Payroll numbers also fell during the month, albeit at the slowest rate since May. Firms were relatively cautious towards their inventory holdings, as highlighted by cuts to both stocks of inputs and post-production goods in November.
Manufacturing companies operating in China signaled a further fall in average input prices in November amid widespread reports of lower raw material costs. Furthermore, the rate of reduction quickened to the sharpest in nine months. As part of attempts to improve sales, companies generally passed on any savings to clients in the form of lower selling prices. In line with the trend for input costs, the rate of discounting accelerated since October and was the fastest recorded in 20 months.
Purchasing Managers' Manufacturing Index (PMIs) is based on monthly questionnaire surveys of selected companies which provide an advance indication of what is really happening in the private sector economy by tracking changes in variables such as output, new orders, stock levels, employment and prices across the manufacturing sectors.
Investors need to keep their fingers on the pulse of the economy because it dictates how various types of investments will perform. By tracking economic data such as the purchasing managers' manufacturing indexes, investors will know what the economic backdrop is for the various markets. The stock market likes to see healthy economic growth because that translates to higher corporate profits. The bond market prefers less rapid growth and is extremely sensitive to whether the economy is growing too quickly and causing potential inflationary pressures.
The Markit PMI manufacturing data give a detailed look at the manufacturing sector, how busy it is and where things are headed. Since the manufacturing sector is a major source of cyclical variability in the economy, this report has a big influence on the markets. And its sub-indexes provide a picture of orders, output, employment and prices.
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