From the independant Caixin/Markit:
Operating conditions faced by Chinese goods producers continued to deteriorate in December. Production declined for the seventh time in the past eight months, driven in part by a further fall in total new work. Data suggested that client demand was weak both at home and abroad, with new export business falling for the first time in three months in December.
As a result, manufacturers continued to trim their staff numbers and reduce their purchasing activity in line with lower production requirements. Meanwhile, deflationary pressures persisted, as highlighted by further marked declines in both input costs and selling prices.
Adjusted for seasonal factors, the Purchasing Managers’ Index™ (PMI™) registered below the neutral 50.0 value at 48.2 in December, down from 48.6 in the previous month. Business conditions have now worsened in each of the past 10 months. That said, the latest deterioration was modest overall.
A renewed contraction of manufacturing output weighed on the headline index reading in December. Although the rate of reduction was modest overall, it was the seventh time in the past eight months that production has fallen, and contrasted with a stabilisation in November. Anecdotal evidence suggested that relatively weak market conditions and reduced client demand had prompted firms to cut output in the latest survey period.
Indeed, total new business declined again in December, and at a similarly modest rate to those seen in the prior two months. Data suggested that softer domestic and international demand led to lower overall new work, with new export business also falling in December. Furthermore, this was the first time that new work from overseas had fallen since September.
Lower output requirements underpinned a further fall in purchasing activity in December. Moreover, the rate of contraction quickened slightly since November and was marked overall. As a result, stocks of inputs also declined over the month, while fewer sales led to a slight accumulation of stocks of finished goods.
Manufacturing companies continued to cut their payroll numbers at the end of 2015 and at a moderate rate. According to panellists, lower staff numbers were the result of company down-sizing policies and cost-saving initiatives. Fewer employees contributed to an accumulation of outstanding work in December, with the rate of growth quickening to an eight-month high.
December data signalled a further fall in average cost burdens faced by Chinese manufacturers. Moreover, the rate of reduction eased only slightly since November and remained sharp overall. Panellists that reported decreased input costs widely attributed this to lower raw material prices. Manufacturers generally passed on their cost savings to clients in the form of lower selling prices, while some companies mentioned that greater market competition had led them to cut their tariffs.
The official PMI:
China’s PMI rose slightly to 49.7 in December from 49.6 a month earlier. Subindices measuring new orders, production activity and inventory rose, while the subindex tracking employment fell. Large companies fared better than small companies in December.
China’s official nonmanufacturing purchasing managers index rose to 54.4 in December from 53.6 in November.
