OREANDA-NEWS. December 07, 2011. China's PMI, a preliminary indicator of the country's manufacturing activity, dropped to 49 percent in November, indicating contraction for the first time since its last under-50-percent reading in February 2009.
 
The November Purchasing Managers' Index (PMI) was down 1.4 percentage points from 50.4 percent in October, the China Federation of Logistics and Purchasing (CFLP) said Thursday.
 
A PMI reading of 50 percent demarcates expansion from contraction.
 
The fall in November's PMI confirmed a continuous trend of cooling growth, but the pace of the growth slowdown will remain steady and there will be a slim chance for great fluctuations, said CFLP Deputy Director Cai Jin.
 
Zhang Liqun, a researcher with the Development Research Center of the State Council, or China's cabinet, echoed Cai's comment, saying a relatively strong momentum of domestic investment and consumption will help stave off a plunge.
 
The country's GDP rose 9.1 percent year-on-year in the third quarter of the year, slowing from 9.5 percent in the second quarter and 9.7 percent in the first quarter.
 
The CFLP's sub-index for new orders in November was 47.8 percent, down 2.7 percentage points from October. The sub-index for purchase prices fell 1.8 percentage points from October to 44.4 percent last month.
 
The sub-index for export orders fell sharply to 45.6 percent in November from October's 48.6 percent, suggesting that the spreading Eurozone debt crisis and weakened demand from both the European Union and the United States were wearing down the growth in the world's second largest economy.
 
"The contracting demand is squeezing profitability out of the manufacturing industry and dampening business confidence," said Peng Wensheng, an analyst with China International Capital Corp.
 
A slowing profit increase will then further constrain companies from expanding production and investment, he said.
 
In November, 10 industries, including transport facility manufacturing, oil refining and tobacco production, enjoyed a PMI of over 50 percent, while other sectors, such as food production, electronic facility manufacturing and non-ferrous metal smelting, were under 50 percent.
 
The CFLP's PMI is based on a survey of purchasing managers in more than 820 companies in 20 industries.
 
The preview of HSBC China's PMI for November dropped from October's 51.0 to 48.0, the lowest level in the past 32 months.