China’s Monthly Business Activity Barely Above Contraction
Vittorio Hernandez | | Jan 01, 2015 04:08 AM EST |
China's manufacturing PMI expanded at 51.1 in August, the slowest pace in three months.
Workers look at machines moving newly made raw bricks at a factory in Huaibei, Anhui province July 31, 2014. REUTERS/China Daily
The Purchasing Managers' Index (PMI) in China dipped to 50.1 in December, down 0.2 from November' 50.3. It is barely above the benchmark 50 points, which is what separates expansion from contraction, and it is the lowest PMI level for 2014.
The result, which came out on Thursday, is exactly what analysts polled by Reuters forecast.
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Explaining the result, Development Research Centre economist Zhang Liqun said in a statement, "This indicates that industrial growth is still in downward trend, but the pace (of declines) is slowing."
He added, "The current economic situation is in the process of returning to stability from slowing down."
The 50.1 PMI highlights the challenges before Chinese producers as they battle soaring costs of manufacturing and softer demand as the country's economy continues to cool down.
A day earlier, global bank HSBC and Markit, a research company, released a competing index which showed an even lower reading of 49.6 for the last month of 2014 from 50 for the previous month.
ANZ Bank economist Li-Gang Liu, quoted by the Wall Street Journal, elucidates, "China's manufacturing sector, especially those industries related to the property market is still struggling."
Li-Gang further said, "China is entering a 'new normal' economy."
The official PMI reported a slight rise in export orders, but new orders decreased to 52.2 from 52.5, which indicates softer domestic demand. The still-cooling property market also impacts different sectors, from furniture to construction equipment.
Given these numbers, HSBC chief economist for China Hongbi Qu prescribed more monetary easing in 2015 to address the weaker economic activity and stronger disinflationary pressure.
On November 21, the People's Bank of China reduced interest rates for the first time in over two years to lower borrowing cost and jumpstart growth.
Besides the additional stimulus, economic advisers recommend that the national government lower China's target growth rate for 2015 to about 7 percent.
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