China’s factory activity last month shrank to its lowest level in six months, fueling expectations that the Chinese government might have to act soon to add impetus to the economy.
The official manufacturing purchasing managers’ index (PMI) declined to 49, the Chinese National Bureau of Statistics (NBS) said in a statement yesterday.
That was weaker than the median forecast of 49.6 by economists in a Bloomberg survey, and matched the reading seen in June.
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A gauge of non-manufacturing activity rose to 50.4 from 50.2 in November, boosted by expansion in the construction sector as government-led infrastructure investment accelerated in recent months.
On the other hand, services activity continued to contract with an underlying measure staying at 49.3.
Any reading above the 50 mark suggests an expansion from the previous month, while a figure below that denotes a contraction.
The PMI figures provided more signs of weakness in China’s economic recovery in the final months of last year. They are also likely to add pressure on fiscal and monetary policymakers to act urgently, after leaders vowed to maintain a pro-growth stance this year.
“The weaker-than-expected PMI data showed growth momentum has declined further amid a low season and the cold weather,” Australia and New Zealand Banking Group Ltd senior strategist Xing Zhaopeng (邢兆鵬) said. “We can’t rule out the possibility that the [Chinese] central bank may cut rates in early January.”
Bureau analyst Zhao Qinghe (趙清河) said in a separate statement that “falling overseas orders coupled with insufficient effective domestic demand” was the biggest trouble reported by some companies in the official PMI survey.
The textile and non-metal mineral product sectors were unable to make use of their full capacity due to subdued demand, Zhao added.
Weak demand and sluggish confidence have also been reflected in deepening consumer price deflation and shrinking imports. The worst property downturn in modern China is expected to persist, which could further curb demand for goods from furniture to home appliances.
A subindex for factories’ new orders fell to 48.7 as demand weakened, while a gauge measuring new export orders contracted to 45.8.
For non-manufacturing sectors, a gauge of construction activity climbed to 56.9 from 55 in November, the NBS said. Some analysts had expected construction momentum to remain robust as Beijing stepped up its efforts to build more infrastructure projects with extra bond issuances.
Some services industries, such as air transport, and lodging and household services lost steam as consumers reduced travel due to cold weather, Zhao said.
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