Manufacturing activity in China last month expanded for a second straight month as seasonal demand and signs of progress in trade talks with Washington boosted factories’ output and order books.
China’s official purchasing managers’ index (PMI) was unchanged from November at 50.2, the Chinese National Bureau of Statistics said yesterday, slightly higher than the 50.1 expected in a Reuters poll of analysts.
It also remained above the 50-point mark that separates monthly growth from contraction.
The better-than-expected readings suggested some recovery in the world’s second-largest economy last month. Production rose at the fastest pace in more than a year, while growth of total new orders was only a notch lower than a high hit last month.
Bureau Senior Statistician Zhao Qinghe (趙清河) attributed the PMI resilience to increasing demand and production ahead of the Lunar New Year holiday late this month.
Production for sectors such as the textile, pharmaceutical, automotive components and telecom equipment industries stood at relatively high levels.
The survey also showed a boost in firms’ willingness to stock up inventories in order to meet production needs ahead of the holidays.
The PMI aligns with other recent signs of strength, with profits at China’s industrial firms growing at the fastest pace in eight months in November, data showed last week.
Growth in industrial and retail sectors also beat expectations in November as government support propped up demand.
It also coincides with signs of improvement in US-China trade talks, which have boosted global investor confidence and helped Chinese manufacturers book new orders from abroad, even though a final deal is yet to be inked.
In particular, new export orders last month rose for the first time since May 2018.
China and the US have announced a “phase one” agreement that would reduce some US tariffs in exchange for more Chinese purchases of US farm products, which analysts believe could stimulate China’s exports and corporate investment in the near term.
On Monday, US Office of Trade and Manufacturing Policy Director Peter Navarro said that the deal would likely be signed in the next week and cited a report that Chinese Vice Premier Liu He (劉鶴) would visit the US this week.
However, there were signs of persistent softness, with a subindex for imports at 49.9, although the pace of contraction slowed.
Similarly, factories also continued to shed jobs last month, although the pace of reduction did not accelerate.
More than 25 million jobs were trimmed from the industrial sector from the end of 2013 to the end of 2018, mostly in labor-intensive industries, the latest census showed, as labor costs rose.
Growth in China’s services sector activity cooled last month, with the official non-manufacturing PMI dropping to 53.5, from an eight-month high of 54.4 in November, a separate bureau survey showed.
The activity in the construction sector pulled back as the winter slowed demand, with the subindex easing from 59.6 the previous month to 56.7.
However, new contracts for civil engineering projects rose on a push for more infrastructure projects to stimulate growth, the bureau said.
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