Manufacturing activity in China contracted in December: Survey

16 December 2014

A survey of Chinese factories revealed manufacturing activity contracted in December, in another pointer that the slowdown in the world's No. 2 economy was quickening, AP reported.

HSBC's preliminary purchasing managers' index released today was down to a seven month low of 49.5 from 50 in November.

A reading above 50 in the 100 point scale index indicates expansion.

This comes as the latest in a series of weak data on China's economy, which expanded at a five-year low of 7.3 per cent last quarter. The rate was much less than the official full year target of 7.5 per cent.

According to other recent official data for November, growth in industrial production slowed to 7.2 per cent even as imports contracted unexpectedly.

The survey finding fuelled expectations that more stimulus would be required to avert a sharper economic slowdown.

The dismal report would add to investor concerns that the world's second-largest economy was losing momentum, and lend support for strong stimulus measures  after the central bank unexpectedly cut interest rates last month, Reuters reported.

Hongbin Qu, chief economist for China at HSBC said, the manufacturing slowdown continued in December and pointed to a weak ending for 2014.

He added the rising disinflationary pressures, which fundamentally reflected weak demand, warranted further monetary easing in the coming months.

The new order index retreated to 49.6 in the first contraction since April.

The level of factory output too continued to remain below 50 for the second consecutive month in December, though it shrank at a slower rate as compared to the reading in November.

The country's top leaders said last week that they would try to sustain reasonable growth in 2015 even though the economy faced "relatively big downward pressure".

According to a Reuters poll, the Chinese economy was likely to grow at 7.4 per cent this year, its slowest pace in nearly a quarter of a century, and cool further to 7.1 per cent in 2015.

To revitalise the economy and to avoid a sharp fall in growth, the government had unveiled a series of stimulus measures since April, with mixed results.

There were some indications in the ailing property market, for instance, that it would bottom out, though it was expected to remain weak well into 2015, dragging on broader economic activity.

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