China’s Caixin manufacturing PMI fell in December

The Caixin manufacturing PMI declined in December to 49.7, the lowest level since May 2017, and was also below market expectations. Sub-indexes of the survey were weak in general, suggesting soft growth momentum and lower price inflation in the manufacturing sector.

China’s Caixin manufacturing PMI fell by 0.4pp to 49.7 in December, below market expectations. Most of the sub-indexes suggest weaker growth in the manufacturing sector, although the production index rose from the previous month. The production sub-index was at 50.3 in December, vs. 50.0 in November. Despite this small increase, the production sub-index remained soft in absolute level terms and close to the bottom of its range in the recent two years. The new orders sub-index moderated to 49.8 from 50.9 in November. The new export orders sub-index rebounded to 48.3 from 47.7 in November, but it was still much lower than the average level of 50.3 in 1H 2018. Employment index edged up by 0.1pp to 48.5. Price indicators implied meaningfully lower inflation in the sector – the output price index and input price index were 1.4pp and 4.4pp lower respectively in December vs. November. Inventories indicators fell – the raw material inventories index was at 49.9 in December vs. 50.3 in November and the finished goods inventory index moderated to 50.5 in December vs. 51.0 in November.

In general, both the NBS and Caixin manufacturing PMI surveys suggest soft growth momentum in the manufacturing sector in December. Trade growth may have weakened and domestic demand growth could have stayed soft. Companies showed willingness of destocking at both input and output levels. Price inflation was lower amid falling commodity and oil prices, which could have added downward bias to the headline manufacturing PMI readings. We continue to expect more loosening measures to be announced by the government to support economic growth.