Factories recovering despite PMI dip
Growth in activity in the mainland'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 yesterday, 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 from contraction.
Meanwhile, the Federal Reserve said US industrial production recorded its largest increase in a year this month as mining and utilities output rebounded strongly, in the latest sign the world's largest economy is gaining steam. Industrial output increased 1.1 per cent last month as auto production swung into higher gear, the Fed said.
Given the approaching holidays, the flash PMI for China covers only the short period from December 5 to 12. The final PMI will be released on January 2. New orders and export orders grew at a faster rate in the period surveyed, while sub-indices 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 [gross domestic product] growth to stabilise at around 7.8 per cent year on year in [the fourth quarter]."
Many economists have said the mainland economy is likely to show weaker momentum in the final three months after a rebound in the second quarter, owing to slowing credit growth and a fall off in restocking demand.
Previous data showed growth in 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 Beijing's 7.5 per cent growth target this year.
Beijing has made it clear that it would accept a slower growth rate while it implements structural reforms to wean the economy away from investment and exports towards consumption.