China: Manufacturing and non-manufacturing PMIs tick down in December
The manufacturing Purchasing Managers’ Index (PMI) published by the National Bureau of Statistics (NBS) and the China Federation of Logistics and Purchasing (CFLP) fell from 52.1% in November to 51.9% in December, below the 52.0% expected by market analysts. As a result, the index remained above the 50.0% threshold that separates expansion from contraction in the manufacturing sector. The reading was driven by slower growth in output and new orders, likely as restrictions tightened abroad. The headline reading masked differences among firms: while large- and medium-sized enterprises continued to expand, the PMI for smaller companies indicated worsening operating conditions.
Looking at the non-manufacturing sector, the PMI stood at 55.7%, down only marginally from 56.4% in November and indicating robust conditions in the services sector, thanks to strong domestic demand.
Regarding December’s reading and the outlook for 2021, Ho Woei Chen, economist at United Overseas Bank, commented:
“The lower readings in December could have been partly due to the cold weather and reported cuts in electricity supplies to some industrial and commercial users as the system was unable to cope with the surge in demand. Nonetheless, the underlying economic recovery momentum in China likely remained intact given that COVID-19 is contained domestically, keeping pent-up demand strong in the coming months. For 4Q20, we are maintaining our GDP growth forecast for China at 6.2% y/y (3Q20: 4.9%) with our full-year 2020 GDP growth at 1.9% and rising to 8.2% in 2021.”