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Engines stall in China's factory sector

Monday, December 01, 2014 - 01:11

Two surveys of Chinese manufacturing activity confirm the world's second largest economy is cooling off, but calls for more economic stimulus might not be able be able to rev it up.

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China's economic engine is losing steam. The official PMI for manufacturing - an indicator for bigger state-owned factories - dropped to an eight-month low of 50.3 in November below expectations and lower than October's 50.8. And things are even gloomier at China's small and medium-sized firms which is captured in the HSBC/Markit PMI survey - a six-month low of 50 - the line that separates expansion from contraction. All this even after China cut interest rates last month for the first time in over two years to jump start things. Sources familiar with China's policymaking say more rate cuts could come as the world's second largest economy faces the risk of GDP growth dipping below seven percent in the fourth quarter. One number that may worry Chinese leaders - employment. The latest PMI surveys showed the labor market remained under stress. Social stability is one of Beijing's top priorities and high unemployment is a big risk. So expect a revving up of stimulus with any further indication that a slowdown in the factory engine will lead to a large scale shedding of jobs.

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Engines stall in China's factory sector

Monday, December 01, 2014 - 01:11