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The first official gauge of China’s economy in November showed manufacturing activity continued to worsen, underscoring concerns about a slowing domestic economy and the uncertainty of what will happen in the trade war.

  • The manufacturing purchasing managers index fell further to 50.0 this month. That’s level marking the divide between expansion and contraction, lower than forecast, and the lowest since July 2016.
  • The gauge of new orders for export, which gives an indication of future demand, was 47.0, up slightly from 46.9 in October.
  • The non-manufacturing PMI, which reflects activity in the construction and services sectors, worsened to 53.4 from 53.9 the previous month.

Key Insights

  • The upsurge in construction activity that has supported the non-manufacturing index over the past few months will be difficult to sustain amid the pollution curbs and dropping local government bond issuance, Freya Beamish and Miguel Chanco, Asia economists at Pantheon Macroeconomics Ltd. wrote in a note dated Nov 28.
  • Government support measures have yet to boost business sentiment and offset the effects of waning domestic and global demand, according to a set of early indicators compiled by Bloomberg Economics.
  • Uncertainty from the trade war continues. Presidents Donald Trump and Xi Jinping areto meet on Saturday, and while Trump has indicated that a deal might be on the table, he has also threatened more tariffs if the talks don’t go well.

With assistance from Yinan Zhao.

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