BEIJING, Nov. 24 (UPI) -- China's manufacturing sector, hit by weakened domestic and foreign demand, is forecast to decline this month to a 32-month low, a report indicated.
A preliminary HSBC Holding PLC report said China's Purchasing Managers' Index or PMI, dropped to 48 in November from 51 in October, the sharpest fall since March 2009, China Daily reported.
The decline indicates gloomy prospects for the world's second-largest economy, HSBC said.
The index, which forecasts activity in the manufacturing sector, is published a week ahead of the monthly official data. A reading below 50 signals contraction, while a number above 50 means expansion.
HSBC chief economist Qu Hongbin said in a research note external demand is set to weaken as the Eurozone debt crisis affects more continents, thus leading to a decline in China's new export orders, which in turn would further reduce manufacturing output in coming months.
He said domestic demand may also fall in November and December because of the cooling in the real estate industry, a major part of China's economy.
A slowdown in the industry would affect demand for building materials, such as steel, cement and glass, as well as other sectors tied to the housing industry, another expert said.
"It is possible that the housing sector will quickly deteriorate in the coming months," economist Zhang Zhang Zhiwei at Nomura International (Hong Kong) told the newspaper.
However, Wang Tao with UBS Securities Co. Ltd. said she doesn't expect "too much policy ease" relating to government steps to cool the economy, as the slowdown in China's exports and economy has been "gradual."