China’s Manufacturing Activity Expands for the Second Consecutive Month Amid Policy Stimulus

By TrendForce

2024-12-02

China manufacturing activity expanded for the second consecutive month in November, driven by policy stimulus and holiday sales, according to data released by the National Bureau of Statistics on November 30.

The Manufacturing PMI reached 50.3 in November, marking a 0.2 percentage point increase from the previous month and slightly surpassing the market expectation of 50.1. Among the sub-indices, the production index continued to expand, rising by 0.4 percentage points to 52.4, while the new orders index improved from 50.0 in October to 50.8.

At the same time, the supplier delivery time index rose from the contraction of 49.8 to the expansion territory at 50.2, reflecting a short-term recovery in demand driven by policies such as the "trade-in" initiatives and the Double 11 shopping festival promotions.

In other indices, the new export orders index increased by 0.8 percentage points to 48.1, likely supported by the "front-loading" effect associated with U.S. presidential candidate Trump’s election. Business expectations for manufacturing continued to improve, with the business outlook index climbing by 0.7 percentage points to 54.7.

Key Focus This Week: U.S. ISM PMI & Employment Situation

Last week, as the "Trump trade" momentum faded, U.S. Treasury yields and the dollar index ended their eight-week streak of gains. The return of capital flows bolstered U.S. equities, pushing the S&P 500 to a new record high, closing at 6,032.39 points. In the bond market, the 10-year U.S. Treasury yield fell sharply by 22 basis points to around 4.18%, while the dollar index retreated to approximately 105.7, reflecting the weakening of Treasury yields. Key Economic Data Review for Last Week   FOMC Meeting Minutes: The Federal Reserve's November meeting minutes revealed that officials remain confident in inflation returning to the 2% target and believe the downside risks to the labor market have diminished. Some officials indicated that, assuming the economy and inflation align with expectations and given the uncertainty around the neutral rate, a gradual approach to rate cuts would be appropriate.   U.S. PCE: The Personal Consumption Expenditures (PCE) price index rose by 2.3% year-on-year (previous: 2.1%) and 0.2% month-on-month (unchanged from the prior month). Core PCE increased by 2.8% year-on-year (previous: 2.7%) and 0.3% month-on-month (unchanged). This uptick largely reflected persistent service price stickiness (up 0.4% month-on-month) and the impact of a low base effect. The results were broadly in line with market expectations, as the Fed had previously forecasted a year-end inflation rebound, followed by a decline in early 2024. Read more at Datatrack   China PMI: China’s manufacturing PMI edged up slightly to 50.3 in November (previous: 50.2). Sub-indices showed production at 52.4 (previous: 52.0), new orders at 50.8 (previous: 50.2), supplier delivery time at 50.2 (previous: 49.6), and new export orders at 48.1 (previous: 47.3). These gains reflected the impact of the "trade-in" policy, Singles' Day promotions, and export acceleration driven by the Trump election effect. Non-manufacturing PMI dipped slightly to 50.0 (previous: 50.2). Key sub-indices such as new orders, input prices, and employment also weakened. By sector, the service activity index remained in expansion at 50.1 (unchanged), while the construction activity index declined further into contraction territory at 49.7 (previous: 50.4), reflecting the seasonal slowdown in the construction sector during winter. Read more at Datatrack   Key Economic Data for This Week   U.S. ISM PMI (12/2) & NMI (12/4) : With the Boeing strike resolved and election uncertainties dissipating, coupled with the tailwinds from Q4’s consumer-driven holiday season, the manufacturing PMI for November is expected to improve slightly to 47.7 (previous: 46.5). Meanwhile, the services PMI is anticipated to remain steady at 55.5 (previous: 56.0), supported by robust consumer activity during the holiday season. Read more at Datatrack   U.S. Employment Data (12/6): October’s nonfarm payrolls were unexpectedly weak due to short-term factors such as hurricanes and the Boeing strike. As these effects subside, nonfarm payroll growth is expected to recover, with November’s figure forecasted at 202,000 (previous: 12,000). The unemployment rate is projected to rise slightly to 4.2% (previous: 4.1%). Read more at Datatrack

2024-12-03

The U.S. Manufacturing Remains in Contraction, but Electronics Sector Supporting a Rebound in New Orders

U.S. manufacturing activity remained in contraction for the eighth consecutive month in November, but the pace of contraction moderated as new orders showed signs of recovery, according to data released by the Institute for Supply Management (ISM) on December 2. The ISM Manufacturing PMI rose to 48.4 in November, up 1.9 percentage points from the prior month, exceeding market expectations of 47.7. Read more at Datatrack Among the sub-indices, the new orders index increased to 50.4 (from 47.1), marking the end of a seven-month contraction. The production index rose to 46.8 (from 46.2), and the inventory index improved significantly to 48.1 (from 42.6). These indicators suggest a modest recovery in demand following the resolution of election-related uncertainties. The employment index also rose to 48.1 (from 44.4), remaining in contraction but showing improvement. The ratio of hires to layoffs improved from 1:3 last month to 1:1.5, aligning with signs of a broader labor market recovery. Read more at Datatrack In other indices, the customer inventories edged up to 48.4 (previous: 46.8), aligning with the inventory index's improvement, though both remained in contraction territory, highlighting the insufficient strength of demand recovery. The new export orders index rose to 48.7 (from 45.5), reflecting continued pressure from economic weakness in key trading partners such as the EU, Japan, and China. However, expectations of further stimulus measures in these regions may support a rebound in export activity in the near term. Read more at Datatrack Overall, while the conclusion of the presidential election has partially alleviated demand uncertainties, high interest rates continue to weigh on demand across most industries, particularly in construction and chemicals, which are closely tied to the real estate sector. As a result, the pace of recovery in overall demand remains subdued. Sectoral disparities in demand were also evident. Among 14 manufacturing industries, only "Food, Beverage, and Tobacco," "Computer and Electronic Products," and "Electrical Equipment" reported expansion. The computer and electronic products sector demonstrated particularly robust growth, with increases in new orders, production, and backlogs. Notably, it was the only sector to report growth in backlogs, highlighting the continued strength in demand driven by AI-related orders.   ISM Industry Comments “High mortgage rates continue to hamper demand for new housing construction, which is a key market for adhesives and sealants.” --Chemical Products “Business remains slow. We anticipate that the first half of 2025 will be similar and hope that demand increases in the second half of 2025.” -- Transportation Equipment “Inflation, even after easing, continues to impact demand. Consumers are looking for value, and purchasing behaviors are changing as many shoppers reduce consumption, causing softer volume.” -- Food, Beverage & Tobacco Products “Backlog is rising precipitously after 18 months of troughing. The long-awaited pent-up buying has started. Competition for qualified technical labor is a constraint on operational throughput.” -- Computer & Electronic Products “A general construction slowdown in the fourth quarter has created a surplus of finished goods, creating the need for an extra two weeks of shutdown over the Christmas holiday period. We are carefully watching demand in the first quarter to determine if more permanent workforce reductions will be necessary.” -- Machinery “Business is slowing as customers destock and appear uncertain about near-term demand. Preliminary forecast for 2025 is down significantly; we hope to see improvements now that we are beyond U.S. election uncertainties.” -- Fabricated Metal Products “Our supplier has a positive outlook on the U.S. economy going into 2025. Our business is seeing an uptick in sales forecasts for the first quarter of 2025 versus the fourth quarter of 2024. Overall, our outlook for 2025 is optimistic.” -- Textile Mills “We’re finally seeing traction in the last few weeks (with) a higher volume of orders. Backlog is starting to grow.” --Electrical Equipment, Appliances & Components “Late to the game, we are now working on our buying plan in light of potential increased tariffs on imports from China. Cost and capacity of U.S. manufacturing is a concern; a lack of relationship with alternate low-cost international manufacturers is another.” -- Miscellaneous Manufacturing “After the election, we have seen an uptick in customers wanting to come back to the U.S. for making their products. We are working through these inquiries. They seem very motivated.” --Primary Metals

Hashtags

China PMI

Market Spotlight