China manufacturing contracts in November, first time since July

China's manufacturing sector deteriorated in November, marking its first contraction since July, S&P Global reported Monday.

The RatingDog China general manufacturing purchasing managers' index fell to 49.9 in November, down from 50.6 in October, and missing the 50.5 FXStreet-cited consensus forecast.

A reading above the 50.0 neutral mark indicates an overall increase in month-on-month business activity, while a reading below signals a contraction.

According to S&P Global, the contraction is driven by a slowdown in new orders, which have eased to almost neutral levels, offsetting a rise in new export orders which expanded at the quickest pace in eight months.

Yao Yu, founder of RatingDog, said: "On the demand side, although new export orders picked up in November, this trend failed to reverse the sluggish state of the manufacturing sector, with new orders remaining almost stagnant. On the production side, affected by the slowdown in new business growth, manufacturers reduced their workforce and purchasing volume, and became more cautious in inventory management.

"Looking ahead, considering the need to sprint toward the annual 5% growth target, there may be strengthened efforts on both the supply and demand sides at the end of the year. The PMI is expected to present a weak expansion trend in December."

Staffing levels fell marginally in November, as resignations and redundancies aimed at cost control among manufacturers contributed to a fourth straight monthly rise in unfinished work.

Purchasing activity also declined for the first time since June, as slower new business growth led firms to pare back input buying and shorten supplier lead times.

Average input prices for Chinese manufacturers rose marginally, with higher metal costs cited, but firms absorbed the muted increase and offered discounts, leading to lower output and export charges amid heightened competition.

According to S&P Global, business sentiment improved despite the slowdown, as Chinese firms remain generally optimistic that supportive government policies, expansion plans and new product launches will spur growth in the year ahead.

S&P Global compiles the monthly PMI based on survey responses from a panel of approximately 650 manufacturers, spanning both private and state-owned firms.