China’s Factory Outlook Eases With Recovery Still on Track

(Bloomberg) — A gauge of China’s manufacturing industry moderated in December from a three-year high in the previous month, with the economy’s recovery stabilizing as the year comes to a close.

The official manufacturing purchasing managers’ index fell to 51.9 from 52.1 in November, the National Bureau of Statistics said Thursday, lower than the median estimate of 52 in a Bloomberg survey of economists.

The nonmanufacturing gauge, which reflects activity in the construction and services sectors, dropped to 55.7. Readings above 50 indicate improving conditions from the previous month.

Key insights

• China’s economic recovery continued in December, as the Christmas season bolstered overseas demand for manufactured goods and domestic activity picked up. With the coronavirus pandemic largely under control, China is on track to be the only major economy to grow in 2020, with economists forecasting an expansion of about 2%

• Exports have surged in the run-up to the year-end holidays, while new waves of coronavirus cases in the rest of the world have boosted demand for medical equipment and work-from-home electronic devices

• However, severe cold weather and power shortages in parts of China in December, coupled with winter output restrictions in industries such as steel and coal, could weigh on production

• Zhao Qinghe, an economist with the statistics bureau, said despite the slight fall in the PMI “the overall manufacturing industry maintained a good momentum of steady recovery”

• “It is still a level that is consistent with very solid growth,” Qian Wang, Asia-Pacific chief economist at Vanguard Group Inc., said in an interview on Bloomberg TV. “The Chinese economy seems to be holding up pretty well in spite of the second wave on the external side”

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• A subindex of new export orders for factories eased to 51.3 in December from 51.5 in the previous month, while new orders were also marginally lower at 53.6

• A subindex of manufacturing employment ticked up to 49.6, while nonmanufacturing employment eased to 48.7

• A set of early indicators showed China’s economic recovery continued in December, underpinned by booming global demand for exports, rising commodity prices and a rallying stock market

Contact editor Yang Ge (geyang@caixin.com)

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