Econintersect: China’s manufacturing sector reported the first PMI (Purchasing Managers’ Index) reading below 50 since April with a December 2014 HSBC/Markit survey result of 49.6. Readings below 50 reflect a contracting manufacturing sector. The latest result showed contractions in both current output and new orders, a particularly discouraging combination, although both were only slightly lower than in November. The survey result was buoyed significantly by increasing exports to keep the overall reading close to 50.
Chinese companies cut their workforce numbers again in December, albeit only slightly, but continuing a long-term trend downward. The increasingly entrenched disinflation and deflation in Chinese manufacturing was reflected by the sharpest decline in both input prices and output charges since the first quarter.
The following graph has been annotated by Econintersect to emphasize the presence of a bearish descending triangle pattern.
Hongbin Qu, Chief Economist, China and Co-Head of Asian Economic Research at HSBC commented on the latest report:
“The HSBC China Manufacturing PMI fell to 49.6 in the final reading for December, down from 50.0 in November. As seen in the flash reading earlier, domestic demand led the slowdown as new orders contracted for the first time since April 2014. Price contraction deepened. Today’s data confirmed the further slowdown in the manufacturing sector towards year end. We believe that weaker economic activity and stronger isinflationary pressures warrant further monetary easing in the coming months.”
HSBC China Manufacturing PMI (Press Release, Markit, 31 December 2014)
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