BEIJING, Jan. 4 (Reuters) – Activity in China’s manufacturing sector surged in December as the world’s second-largest economy continued its recovery to pre-pandemic levels, a business survey on Monday found, but increasing cost pressures slowed the economy. expansion.
The Caixin / Markit Manufacturing Purchasing Managers’ Index (PMI) fell to 53.0 from 54.9 in November, with the gauge remaining well above the 50 level separating growth from contraction, but missing expectations and weakening to the lowest rate in three months.
Analysts polled by Reuters had predicted the headlines would drop to 54.8.
China’s massive industrial sector has seen an impressive recovery from the coronavirus shock thanks to surprisingly strong exports. The economy is expected to grow by about 2% for the whole of 2020 – the weakest rate in more than three decades, but much stronger than other major economies that are still struggling to keep infections at bay.
However, stricter coronavirus controls at many of its major trading partners in the west could hurt industrial demand, weighing on the recovery.
The Caixin PMI reading comes after an official gauge of factory activity, focusing more on larger and state-owned companies, also subdued but remaining strong.
“The negative impact of the pandemic on the domestic economy continued to diminish and the manufacturing sector continued to recover. Both the supply and demand sides continued to improve. Overseas demand was also steadily increasing, ”Wang Zhe, senior economist at Caixin Insight Group, wrote in a note accompanying the survey’s publication.
The private sector survey also found that input prices rose sharply, at their fastest pace since 2017, with more expensive commodities, especially metals, blamed for the increase. Chinese factories also laid off more workers than they hired for the first time in four months, although the decline was modest.
“We need to be aware of the increasing cost pressures caused by the rise in commodity prices and its negative impact on employment, which is especially important for the design of ending the stimulus policies put in place during the epidemic”, Wang said.
Polls of both total new orders and factory output were down compared to November, but remained strong. The growth of new export orders also slowed.
“We expect the post-epidemic economic recovery to continue for several months, and macroeconomic indicators will be stronger in the next six months, taking into account the low bases in the first half of 2020,” Wang said. (Reporting by Gabriel Crossley; edited by Sam Holmes)