In December, growth in China's manufacturing sector moderated owing to a reduction in foreign demand, according to S&P Global's survey released on Wednesday.
The Caixin Manufacturing Purchasing Managers' Index (PMI) registered at 50.5 for December, showing a decline from 51.5 in November. Analysts had anticipated a slight increase to 51.6. Despite an improvement in the manufacturing sector for a third consecutive month, the pace of growth has slowed since November.
Official PMI figures released earlier in the week indicated only marginal expansion in the manufacturing sector for December, with the PMI decreasing to 50.1 from the previous month's 50.3.
S&P Global's data noted that manufacturing output has grown for fourteen consecutive months; however, the rate of this expansion has lessened due to a slowdown in new order growth. The survey highlighted that although new orders increased for a third month, bolstered by improved underlying demand and effective business strategies, growth was tempered by weaker external demand.
Additionally, purchasing activity climbed for a third consecutive month, and stocks of purchases similarly increased. Reports suggested that this trend was partly driven by manufacturers' safety stock strategies.
Regarding employment, manufacturing headcounts continued to decline in December, but this decrease was the slowest experienced in the past four months.
On pricing, the survey revealed a decrease in average selling prices for the first time since September, despite a modest reduction in contrast to rising input costs. Respondents indicated they had absorbed cost increases and subsequently reduced selling prices to boost sales. Export charges also saw a decline in December.
Furthermore, business confidence waned towards the year's end. Chinese manufacturers expressed their least optimistic outlook since September, citing concerns about growth and trade prospects, particularly with the looming threat of U.S. tariffs, which dampened expectations for product- and policy-driven sales growth in the upcoming year.
Wang Zhe, Senior Economist at Caixin Insight Group, commented, "This year's external environment is poised to be more complex, necessitating early policy planning and agile responses." He further emphasized, "Upcoming policies should prioritize increasing household income and improving living standards, particularly enhancing spending capacity and willingness among socially disadvantaged groups."
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