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Upbeat Chinese factory data boosts markets

By Hugh Wilson

PMI beats expectations after ‘solid increase’ in output and new orders to hit three-year high

Chinese factory activity grew faster than expected in November, according to the latest Caixin/Markit manufacturing Purchasing Managers’ Index (PMI).

The PMI came in at 51.8 for November, its highest in three years, and a slight increase on the October figure of 51.7. Readings above 50 show growth.

Economists polled by Reuters had expected the index to fall to 51.4. Instead, companies saw increases in both output and new business.

The survey said that “new business rose strongly, which underpinned a further solid increase in production. Notably, new export orders saw the first back-to-back monthly rise for over a year-and-a-half.”

China’s official PMI, which tends to focus on larger and state-owned organisations, was also up in November, to 50.2. Caixin/Markit’s index features more data from small and medium sized enterprises.

The upbeat figures come despite the continuing US-China trade war, which shows no sign of ending after President Trump signed legislation last week backing Hong Kong’s pro-democracy protesters.

Zhengsheng Zhong, director of macroeconomic analysis at CEBM Group, a Caixin subsidiary, said that “business confidence remained subdued” and that future growth may depend on progress in ending the dispute.

“If trade negotiations between China and the US can progress in the next phase and business confidence can be repaired effectively, manufacturing production and investment is likely to see a solid improvement,” he said.

FURTHER READING: Chinese factory activity shows significant growth in October

Markets reacted positively to the index, with Brent crude oil futures rising on the news. This was despite more gloomy results from the Eurozone, where factories shrank again in November, and Japan, where figures showed export orders at their weakest in five months.

FURTHER READING: Eurozone economic growth set to slow

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