China's manufacturing activity expanded at the fastest pace in 14 months in December amid a build-up in new orders, preliminary results of a survey by Markit Economics revealed Friday.
The headline HSBC/Markit purchasing managers' index rose to 50.9 in December from 50.5 in November. This was the highest reading in 14 months.
A PMI reading above 50 indicates expansion of the sector, while a reading below 50 suggests contraction. New orders expanded at a faster pace this month, while new export orders decreased reflecting slackening external demand.
The data "confirmed that China's ongoing growth recovery is gaining momentum mainly driven by domestic demand conditions," HSBC Chief Economist Hongbin Qu said.
Meanwhile, growth in production slowed from the previous month. The manufacturing output index fell to 50.5 from 51.3 in November.
Employment level in the manufacturing sector remained unchanged. Input price inflation eased in December, while output prices rebounded from a decline in November.
"The drop of new export orders and the downside surprise of November exports growth suggest the persisting external headwinds," HSBC's Hongbin said. "This calls for Beijing to keep an accommodative policy stance to counter-balance the external weakness, provided inflation stays benign."
The central bank has cut interest rate and the reserve requirement twice this year to counter continued slowdown in economic growth. China's economy expanded 7.4 percent in the third quarter from a year earlier, the slowest pace in three years.
by RTT Staff Writer
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