Manufacturing sees first slowdown for 19 months

Source: Xinhua | 2019-01-03

China’s manufacturing sector contracted for the first time in 19 months, mainly due to the falling number of new orders, according to a report released yesterday.

The Caixin China General Manufacturing Purchasing Managers’ Index, which gauges vitality in the manufacturing sector and is weighted to private companies, came in at 49.7 in December, after registering 50.2 in November, Caixin magazine and research firm Markit said.

A reading below 50 indicates contraction. This is the first contraction since May 2017.

Zhong Zhengsheng, director of macro-economic analysis at CEBM Group, said a fall in new orders was the main reason for the slide.

“The sub-index for new orders slid below the break-even point of 50 for the first since June of 2016, reflecting decreasing demand in the manufacturing sector,” Zhong said in a research note.

“While domestic demand weakened more notably in December, external demand remained subdued due to trade frictions,” Zhong said.

The report said several surveyed companies commented that relatively sluggish market conditions weighed on sales at the end of 2018.

This is despite data signalling a renewed increase in industrial production as the output index showed slight improvement.

Other indices showed that employment in the sector declined again, while prices for manufactured goods fell for the second month in a row.

The results were largely in line with the official PMI released by the National Bureau of Statistics on Monday, which measures performance in mostly large state-owned enterprises.

The official PMI stood at 49.4 in December, down from 50 in November — the first contraction since July 2016.

Huang Jun, chief Chinese analyst at Forex.com, said weak demand across the world is expected to weigh on expectations.

This will lead to more caution among investors.

“The year of 2019 has more uncertainties than what we have seen in 2018,” Huang said.

China’s economy is expected to grow 6.3 percent year on year in 2018, according to the Chinese Academy of Social Sciences in a recent report, compared with 6.9 percent in 2017.

That still makes China one of the fastest growing economies.