China’s HSBC flash PMI sinks to three-month low, but rebound signals stay
December's 50.5 rate still above average from previous quarter, buoyed by manufacturing and retail
Growth in activity in China’s vast factory sector slowed to a three-month low in December as reduced output offset a pickup in new orders, a preliminary private survey showed on Monday, in line with other recent data pointing to a resilient but slowing economy.
The flash Markit/HSBC Purchasing Managers’ Index (PMI) fell to 50.5 from November’s final reading of 50.8, but for a fifth consecutive month remained above the 50 line which separates expansion of activity from contraction.
Given the approaching year-end holiday season, the flash PMI covers only the short period from December 5 to 12. The final PMI will be released on January 2.
Growth in both new orders and export orders grew at a faster rate in the period surveyed, while sub-indexes measuring employment and stocks of purchases showed faster rates of decrease.
“The December HSBC Flash China Manufacturing PMI reading slowed marginally from November’s final reading,” said Hongbin Qu, chief economist for China at HSBC, in a comment accompanying the PMI.
“But it still stands above the average reading for [the third quarter], implying that the recovering trend of the manufacturing sector starting from July still holds up. As a result, we expect China’s GDP growth to stabilise at around 7.8 per cent year on year in [the fourth quarter].”
Many economists have said China’s economy is likely to show weaker momentum in the final three months of this year after a rebound between July and September, due to slowing credit growth and a fall off in restocking demand.
Data earlier in the month showed growth in China’s factory output and investment eased slightly in November, though retail sales grew at their strongest rate this year, suggesting the economy is on track to achieve the government’s 7.5 per cent growth target this year.
Beijing has made it clear that it would accept a slower growth rate while it pushes ahead with economic reforms to wean the growth away from investment and export towards consumption.
The leadership pledged to maintain stable economic policies to achieve reasonable economic growth next year while forging ahead with reforms, as they wrapped up a closed-door meeting on Friday.
The annual Central Economic Work Conference did not set a target for next year GDP growth, with state media reporting that the government would “maintain appropriate growth in gross domestic product”.