There could be light beyond the PMI gloom but the key word is "could be". Latest November PMIs remained in the red with the overall manufacturing and electronics PMIs reporting readings of 49.2 and 49.0 respectively. However, there may be silver linings amid an otherwise dreary outlook for the manufacturing sector. Firstly, this is second consecutive months of improvement, from the bottom registered in September. Though it may be premature to call this a trend, at least the numbers are heading higher.
Moreover, the sub-indexes are supporting that hypothesis too. Indexes for new orders, production, inventory and employment are all hinting of manufacturers' anticipation for stronger orders. In addition, while stocks of finished goods remained above 50, it is easing. This suggests a minor destocking in process, which may prompt an upward adjustment in production in the subsequent 1-2 months.
However, such optimism must be caveated against the fact that the PMI is not seasonally adjusted. That is, such improvement could merely be due to seasonal factors. Beyond the year end festive season effect, manufacturers could well be front-loading production ahead of Chinese New Year lull period in early February. So, fingers crossed that this truly marks a trend and that the worst is behind.
