Caixin PMI falls in December after five-month rise

Photo taken on July 16, 2019 shows a workshop producing mobile phone frame parts at Huamao Electronics Group in Chang’an Town of Dongguan, south China’s Guangdong Province. Photo:Xinhua

China’s manufacturing activity in December remained in the expansion territory but slipped from a November three-year peak. The Caixin Purchasing Managers’ Index (PMI) for manufacturing suggested this was due to the slowing growth of domestic demand.

The Caixin manufacturing PMI in December read 51.5, compared to 51.8 in November. Readings above 50 suggest expansion, while numbers below 50 fall into contraction territory.

The reading in December marked the end of a five-month continuous rise and fell short of the 51.8 market expectation, though it was higher than readings from the first three quarters of 2019.

The slight drop from the previous month signals the slowing growth of domestic demand, according to a Caixin report citing Zhong Zhengsheng, director of macroeconomic analysis at the consultancy CEBM Group.

The input cost rose faster in December than the month prior, with the increased costs of staff and raw materials pushing up selling prices, Caixin’s survey showed.

However, the general trend of manufacturing activity is likely to remain stable as an index for future output expectation rose in December, suggesting manufacturers’ increasing confidence in their future outlook.

“As a phase-one deal [between China and the US] is expected to be signed, companies are more optimistic about international trade relations. And more international orders are expected to come in,” Tian Yun, vice president of the Beijing Economic Operation Association, told the Global Times on Thursday.

Tian also expects domestic demand to rise in the coming months as the effects of large infrastructure projects start to kick in, boosting domestic orders.

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