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China PMI December 2021

China: Manufacturing PMI hits highest reading since July in December; non-Manufacturing PMI edges up

The National Bureau of Statistics’ Manufacturing Purchasing Managers’ Index (PMI) rose to 50.3 in December from November’s 50.1. December’s result marked the strongest reading since July. As such, the index moved further above the 50-threshold, signaling a faster improvement in business conditions compared to the previous month. The headline print largely reflected improved purchasing activity and a softer decline in new orders. Moreover, input prices fell—the first such decline in almost two years—amid a recent sharp drop in domestic coal prices following government intervention.

Meanwhile, the non-Manufacturing PMI rose from 52.3 in November to 52.7 in December, due to faster growth in services offsetting a slowdown in the construction sector. Despite the improvement, the PMI readings were still subdued by recent historical standards amid several growth headwinds, such as the property downturn, Covid-19 flare-ups and regulatory uncertainty.

Analysts at Nomura were downbeat regarding the near-term outlook:

“Looking to January, we expect the manufacturing PMI to fall to 50.0, weighed on by the stricter-than-usual antipollution measures to ensure blue skies for the upcoming Winter Olympics that will start in early February and contracting demand as result of the property downturn and slowing export growth. The non-manufacturing PMI could fall to 52.0, as the strict social distancing measures will remain largely in place ahead of the upcoming Spring Festival travel rush and Winter Olympics, especially if we take into consideration the […] strict lockdown imposed on Xi’an, the capital city of Shaanxi province.”

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