- Manufacturing PMI declined to 49 due to subdued demand
- The Chinese central bank could cut rates in early January: ANZ
China’s factory activity shrank in December to the lowest level in six months, fueling expectations the government may have to act soon to add impetus to the economy.
The official manufacturing purchasing managers index declined to 49, the National Bureau of Statistics said in a statement on Sunday. That was weaker than the median forecast of 49.6 by economists in a Bloomberg survey, and matched the reading seen in June.
A gauge of non-manufacturing activity rose to 50.4 from 50.2 in November, boosted by expansion in the construction sector as government-led infrastructure investment accelerated in recent months. Services activity, however, remained in contraction with an underlying measure staying at 49.3.
Any reading above the 50 mark suggests an expansion from the previous month, while a figure below that denotes contraction.
The PMI figures provided more signs of weakness in China’s economic recovery in the final months of the year. They are also likely to add pressure on fiscal and monetary policymakers to act urgently, after leaders vowed to maintain a pro-growth stance in 2024.
“The weaker-than-expected PMI data showed growth momentum has declined further amid a low season and the cold weather,” said Xing Zhaopeng, a senior strategist at Australia & New Zealand Banking Group. “We can’t rule out the possibility that the central bank may cut rates in early January,” he said.
NBS analyst Zhao Qinghe said in a separate statement that “falling overseas orders coupled with insufficient effective domestic demand” was the biggest trouble reported by some companies in the official PMI survey. The textile and non-metal mineral product sectors were unable to make use of their full capacity due to subdued demand, Zhao added.
Weak demand and sluggish confidence has also been reflected in deepening consumer price deflation and shrinking imports. The worst property downturn in modern China is expected to persist, which will further curb demand for goods from furniture to home appliances.
For non-manufacturing sectors, a gauge of construction activity climbed to 56.9 from 55 in November, according to the NBS. Some analysts had expected construction momentum to remain robust as the government stepped up the effort to build more infrastructure projects with extra bond issuance.
Some services industries, such as air transport, lodging, and household services, lost steam as consumers reduced traveling due to cold weather, according to NBS’ Zhao.
Written by: Bloomberg News — With assistance from John Liu, Yujing Liu, Bei Hu, and Fran Wang @Bloomberg
The post “China Factory Activity Posts Worst Contraction in Six Months” first appeared on Bloomberg
BullsNBears.com was founded to educate investors about the eight secular bear markets which have occurred in the US since 1802. The site publishes bear market investing recommendations, strategies and articles by its analysts and unaffiliated third-party and qualified expert contributors.
No Solicitation or Investment Advice: The material contained in this article or report is for informational purposes only and is not a solicitation for any action to be taken based upon such material. The material is not to be construed as an offer or a recommendation to buy or sell a security nor is it to be construed as investment advice. Additionally, the material accessible through this article or report does not constitute a representation that the investments or the investable markets described herein are suitable or appropriate for any person or entity.