Manufacturing conditions remain healthy in China although the pace of growth moderated in December with new orders rising only fractionally and pressure mounting on export orders, according to the latest research data on the world’s second biggest economy.
Production rose overall in China during the month but fell to a 3-month low, according to the HSBC Purchasing Managers’ Index report from HSBC and partner Markit, which showed the PMI easing from November’s 8-month high. The weakness was reflected in lower payroll reported by manufacturers in China as employers declined to replace workers who quit voluntarily.
Despite the slight weakness, the PMI remained in December above 50, the level that points to continued manufacturing expansion. The HSBC/Markit report said China’s manufacturing PMI was 50.5 in December, down from 50.8 in November although purchasing activities continued to strengthen, climbing during the month for the fifth consecutive month. Respondents to the HSBC/Markit monthly survey cited rising production as one of the factors behind the upswing in purchasing orders.
“The moderation of December's final HSBC China Manufacturing PMI was mainly due to slower output growth. However, the final PMI sustained the fifth above-50 reading in a row thanks to a steady increase of new orders,” said Hongbin Qu, chief economist, China & co-head of Asian Economic Research at HSBC, in a report. “The recovering momentum since August 2013 is continuing into 2014, in our view. With inflation still benign, we expect the current monetary and fiscal policy to remain in place to support growth."