China November factory activity likely continued steady expansion

BEIJING (Reuters) - Activity in China’s manufacturing sector likely held onto a modest expansionary trend this month, a Reuters poll showed, as industrial firms continued to benefit from higher producer prices and a recovery in demand.

A worker walks inside the China Steel Corporation factory, in Kaohsiung, southern Taiwan August 26, 2016. REUTERS/Tyrone Siu/File Photo

The official manufacturing Purchasing Managers’ Index (PMI) is expected to come in at 51.0 in November, which would be the fourth straight month of expansion, according to the median forecast of 36 analysts polled by Reuters.

The index hit a two-year high of 51.2 in October as a housing and infrastructure spree has fueled stronger demand and higher prices for building materials, boosting sales for related companies from engineering firms to property agents.

Data on Sunday showed profits at industrial companies rose 9.8 percent in October from a year ago, higher than the rate in September, primarily on the back of strength in high-polluting heavy industry.

Factory activity in China started to pick up in August, buoyed by a government infrastructure building spree and a housing boom, as well as a loose monetary policy.

Most analysts say the economy will face fresh challenges next year as stimulus wears off and a housing boom slows, though they say the government will likely rely on fiscal measures and refrain from further broad loosening measures.

October’s survey of manufacturers had shown a slightly improved performance by small and medium-sized companies, but large companies fared better as they benefit more from government-directed stimulus measures such as increased infrastructure spending.

The official manufacturing PMI data will be released on Dec. 1, along with the official non-manufacturing PMI.

Activity in China’s services sector in October expanded at the fastest pace since December 2015. Beijing has been counting on a strong services sector to pick up the slack as it tries to shift the economy away from a dependence on heavy industry and manufacturing exports.

The Markit/Caixin PMI, a private gauge of manufacturing activity which focuses more on small- and mid-sized firms, is also due on Dec. 1.

Analysts expect it to fall to 50.8, compared with the previous month’s reading of 51.2.

(This version of the story corrects release date to Dec. 1 from Nov. 1 in paragraph 8.)

Reporting by Elias Glenn and Wang Jing; Editing by Simon Cameron-Moore