BEIJING: China's manufacturing activity contracted in December, HSBC's closely watched purchasing managers' index (PMI) showed Wednesday, as the world's second-largest economy is buffeted by domestic headwinds.
The British banking giant's final PMI for the month came in at 49.6, HSBC said in a statement, slightly up from a preliminary reading of 49.5 but still the lowest in seven months.
It also marked the first contraction since May's 49.4. Readings above 50 indicate growth, while anything below points to shrinkage.
The index, compiled by information services provider Markit, tracks activity in China's factories and workshops and is a key indicator of the health of the Asian economic giant, a key driver of global growth.
"Today's data confirmed the further slowdown in the manufacturing sector towards year end," Qu Hongbin, HSBC's economist in Hong Kong, said in the statement.
The slowdown was mainly driven by sluggish domestic demand as new orders contracted for the first time since April 2014, he added.
In contrast, new exports rose for the eighth month in a row and at a slightly quicker rate than in November, according to the statement, signalling buoyant foreign demand as US growth recovers.
China's economy faces multiple challenges including falling property prices, high debt levels, and what some economists see a looming threat of deflation.
It expanded 7.3 percent in the third quarter, the government said in October, lower than the 7.5 percent of the previous three months and the slowest since 2009 at the height of the global financial crisis.
It has showed continued weakness in the current fourth quarter.
The central People's Bank of China last month cut interest rates for the first time in more than two years to jolt slowing growth, but analysts say further easing steps are needed.
"We believe that weaker economic activity and stronger disinflationary pressures warrant further monetary easing in the coming months," Qu said.
Chinese leaders have committed themselves to rebalancing the economy to one in which the country's increasingly prosperous consumers drive growth, even if at a slower rate.
The government set a growth target of around 7.5 percent for this year. It is widely believed policymakers lowered that goal to about 7.0 percent for 2015 at a key economic meeting earlier this month.
Comments
Comments are closed.