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PMI suffers December drop

Output in the Chinese manufacturing sector increased for the fifth consecutive month

Chinese manufacturing conditions hit a three-month low in December, according the HSBC China Manufacturing Purchasing Managers' Index™ (PMI™). The index was 50.5, down from 50.8 in November, unchanged from the earlier flash reading.

However, output increased for the fifth consecutive month. New orders also increased, albeit at a slower pace. Growth was supported by a further expansion of total new work. But new export orders declined for the first time since August. Backlogs of work increased at a moderate pace.

Qu Hongbin, Chief Economist for Greater China and Co-Head of Asian Economic Research, HSBC, said: “The moderation of December’s final HSBC China Manufacturing PMI™ was mainly due to slower output growth. However, the final PMI™ sustained the fifth above-50 reading in a row thanks to a steady increase of new orders.”

The final PMI™ sustained the fifth
above-50 reading in a row thanks to a steady increase of new orders

Qu Hongbin,
Chief Economist for Greater China, HSBC

Staffing levels fell for the second consecutive month largely because voluntary leavers were not replaced. Purchasing activity rose for the fifth successive month, with higher production requirements cited by a number of panellists.

Average input costs rose for the fifth successive month. Selling prices declined for the first time in five months, with insufficient demand for goods leading some companies to offer discounts.

Qu Hongbin added: “The recovering momentum since August 2013 is continuing into 2014 in our view. With inflation still benign, we expect the current monetary and fiscal policy to remain in place to support growth.”

PMIs™ are based on data compiled from monthly replies to questionnaires sent to purchasing executives in manufacturing companies. A reading above 50 indicates expansion, while one below 50 signals contraction.

The January HSBC Flash China Manufacturing PMI is due for release on 23 January.

India slowdown

Manufacturing activity in India slowed in December, according to the HSBC India Manufacturing Purchasing Managers’ Index™. The index was 50.7, down from 51.3 in November.

Leif Eskesen, Chief Economist for India and ASEAN, HSBC, said: “Manufacturing activity decelerated slightly in December as a slowdown in domestic order flows led to slower output growth.”

Output and new orders increased, prompting businesses to increase staff numbers. Panellists linked higher levels of new work to improved domestic and overseas demand.

Leif Eskesen added: “Today’s numbers show that growth remains moderate and struggles to take off due to lingering structural constraints.”

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