China Manufacturing Sector Shrinks For First Time Since 2017

chinapmi fx 02jan19

China's manufacturing activity fell in December, due to a decline in new orders, for the first time since May 2017, survey data from IHS Markit showed on Wednesday.

The headline seasonally adjusted Caixin Factory Purchasing Managers' Index, or PMI, fell to 49.7 from 50.2 in November.

Any reading below 50 indicates contraction in the sector. Prior to December, manufacturing activity had stagnated in the previous two months.

The total new work fell for the first time since June 2016. Meanwhile, new export business declined for the ninth month in a row, but at a softer pace.

The employment level decreased as companies decided not to replace voluntary leavers and to reduce operations cost.

On the price front, the input price declined for the first time since May 2017 and the output prices fell for the second month in a row.

Busines confidence of twelve-month outlook for production edged up to a three-month high in December.

"Companies had a stronger intention to destock and prices of industrial products were declining, which could further drag on production", CEBM Group Macroeconomic Analysis Director Zhengsheng Zhong said.

"It is looking increasingly likely that the Chinese economy may come under greater downward pressure."

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