By Jason Subler
BEIJING, Jan 4 (Reuters) - China's manufacturing sector contracted for the third month in a row in December, but the pace of deterioration slowed as output and new orders improved slightly, an official survey showed on Sunday.
The official purchasing managers' index (PMI) rose to 41.2 in December from the record low of 38.8 plumbed in November, the China Federation of Logistics and Purchasing (CFLP) said.
The reading was in line with the December PMI published by brokerage CLSA, released on Friday. That index edged up to 41.2 from a record low of 40.9 in November, despite a record drop in output.
Both indexes are designed to give a timely snapshot of the state of the manufacturing sector, which has been a major driver of China's headlong economic growth in recent years.
Readings over 50 indicate an expansion of activity, while those below 50 suggest a deterioration. The further the readings are from 50, the more marked the growth or contraction.
'This month's PMI shows that the Chinese economy continues to lose momentum, but there are signs of it hovering around a bottom,' said Zhang Liqun, a government economist who comments on the official survey for the logistics federation.
'As the adjustment in stocks of goods starts to taper off and macroeconomic policies start to show results, the slowdown in growth will probably become less pronounced in the future.'
The sub-index for output rose to 39.4 in December from 35.5 in November and that for new orders picked up to 37.3 from 32.3, indicating that while manufacturing activity was still shrinking, there was some improvement from the month before.
Buffetted by slumping exports, recessions in many of its export markets and weak domestic investment, China is headed for single-digit growth in 2008 after five straight years of double-digit expansion.
Some economists forecast as little as 5 percent growth next year, which would be the country's lowest rate in nearly two decades.
RISING UNEMPLOYMENT
Yu Song with Goldman Sachs in Hong Kong said in a research note that the official PMI reading suggested annual industrial output growth could slow to around 3 percent in December, down from November's record low of 5.4 percent.
That would add pressure on authorities to take further steps to stem a rise in factory layoffs, on top of earlier measures including a 4 trillion yuan ($586 billion) stimulus package launched in November and repeated interest rate cuts by the central bank.
Manufacturers continued to accelerate job cuts in December, the PMI showed, a trend that Beijing fears could lead to rising unrest as the ranks of the unemployed swell. Its employment sub-index fell to 43.3 from November's 44.3.
The export order sub-index rose to 30.7 in December from 29.0 in November, showing that orders from overseas customers shrank for the sixth month in a row, albeit slightly less quickly.
Deflationary pressures also eased somewhat, with the input price index rising to 32.7 from 26.6 in November.
The beverage and pharmaceutical sectors fared the best among the industries surveyed, being the only two to enjoy a reading above the boom-bust line of 50 in December.
Makers of transport equipment, metals, chemical fibres and furniture were among the hardest hit, with readings below 40.
Following is a breakdown of the purchasing managers' index:
Dec Nov Oct Sep Aug Jul
Overall PMI 41.2 38.8 44.6 51.2 48.4 48.4
Output 39.4 35.5 44.3 54.6 48.7 47.4
New orders 37.3 32.3 41.7 51.3 46.0 46.2
New export orders 30.7 29.0 41.4 48.8 48.4 46.7
Backlogs of orders 35.8 36.0 40.7 47.3 45.4 45.4
Stocks of finished goods 44.7 50.8 51.4 50.5 49.0 47.8
Quantity of purchases 36.2 34.2 42.4 50.8 46.8 47.1
Imports 33.3 32.2 39.4 46.4 45.3 45.4
Input prices 32.7 26.6 32.3 44.7 57.8 71.3
Stocks of purchases 40.6 39.5 42.6 47.5 46.8 48.0
Employment 43.3 44.3 47.0 50.3 50.7 50.6
Suppliers' delivery times 50.4 50.7 50.8 50.8 49.5 48.5
(Reporting by Jason Subler; Editing by Kim Coghill) Keywords: CHINA ECONOMY/PMI (jason.subler@thomsonreuters.com; +8610 6627 1215; Reuters Messaging: jason.subler.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
BEIJING, Jan 4 (Reuters) - China's manufacturing sector contracted for the third month in a row in December, but the pace of deterioration slowed as output and new orders improved slightly, an official survey showed on Sunday.
The official purchasing managers' index (PMI) rose to 41.2 in December from the record low of 38.8 plumbed in November, the China Federation of Logistics and Purchasing (CFLP) said.
The reading was in line with the December PMI published by brokerage CLSA, released on Friday. That index edged up to 41.2 from a record low of 40.9 in November, despite a record drop in output.
Both indexes are designed to give a timely snapshot of the state of the manufacturing sector, which has been a major driver of China's headlong economic growth in recent years.
Readings over 50 indicate an expansion of activity, while those below 50 suggest a deterioration. The further the readings are from 50, the more marked the growth or contraction.
'This month's PMI shows that the Chinese economy continues to lose momentum, but there are signs of it hovering around a bottom,' said Zhang Liqun, a government economist who comments on the official survey for the logistics federation.
'As the adjustment in stocks of goods starts to taper off and macroeconomic policies start to show results, the slowdown in growth will probably become less pronounced in the future.'
The sub-index for output rose to 39.4 in December from 35.5 in November and that for new orders picked up to 37.3 from 32.3, indicating that while manufacturing activity was still shrinking, there was some improvement from the month before.
Buffetted by slumping exports, recessions in many of its export markets and weak domestic investment, China is headed for single-digit growth in 2008 after five straight years of double-digit expansion.
Some economists forecast as little as 5 percent growth next year, which would be the country's lowest rate in nearly two decades.
RISING UNEMPLOYMENT
Yu Song with Goldman Sachs in Hong Kong said in a research note that the official PMI reading suggested annual industrial output growth could slow to around 3 percent in December, down from November's record low of 5.4 percent.
That would add pressure on authorities to take further steps to stem a rise in factory layoffs, on top of earlier measures including a 4 trillion yuan ($586 billion) stimulus package launched in November and repeated interest rate cuts by the central bank.
Manufacturers continued to accelerate job cuts in December, the PMI showed, a trend that Beijing fears could lead to rising unrest as the ranks of the unemployed swell. Its employment sub-index fell to 43.3 from November's 44.3.
The export order sub-index rose to 30.7 in December from 29.0 in November, showing that orders from overseas customers shrank for the sixth month in a row, albeit slightly less quickly.
Deflationary pressures also eased somewhat, with the input price index rising to 32.7 from 26.6 in November.
The beverage and pharmaceutical sectors fared the best among the industries surveyed, being the only two to enjoy a reading above the boom-bust line of 50 in December.
Makers of transport equipment, metals, chemical fibres and furniture were among the hardest hit, with readings below 40.
Following is a breakdown of the purchasing managers' index:
Dec Nov Oct Sep Aug Jul
Overall PMI 41.2 38.8 44.6 51.2 48.4 48.4
Output 39.4 35.5 44.3 54.6 48.7 47.4
New orders 37.3 32.3 41.7 51.3 46.0 46.2
New export orders 30.7 29.0 41.4 48.8 48.4 46.7
Backlogs of orders 35.8 36.0 40.7 47.3 45.4 45.4
Stocks of finished goods 44.7 50.8 51.4 50.5 49.0 47.8
Quantity of purchases 36.2 34.2 42.4 50.8 46.8 47.1
Imports 33.3 32.2 39.4 46.4 45.3 45.4
Input prices 32.7 26.6 32.3 44.7 57.8 71.3
Stocks of purchases 40.6 39.5 42.6 47.5 46.8 48.0
Employment 43.3 44.3 47.0 50.3 50.7 50.6
Suppliers' delivery times 50.4 50.7 50.8 50.8 49.5 48.5
(Reporting by Jason Subler; Editing by Kim Coghill) Keywords: CHINA ECONOMY/PMI (jason.subler@thomsonreuters.com; +8610 6627 1215; Reuters Messaging: jason.subler.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
© 2009 AFX News
