The growth of factory activity in China in December showed a pace that turned out to be lower than the preliminary expectations of experts and became clear evidence that the stimulus measures imposed in the second half of 2024 are not enough to significantly boost the economic system of this Asian country.
The official purchasing managers’ index (PMI) in China last month was recorded at 50.1. The corresponding data was published by the National Bureau of Statistics of the Asian country. At the same time, economists polled by the media predicted that the mentioned indicator in December would be fixed at 50.3. In November, manufacturing activity in China was 50.3. A month earlier, this indicator was recorded at 50.1.
It is worth noting that the PMI above 50 indicates an increase in activity. An indicator below the mentioned reading signals a contraction.
Data released by the National Bureau of Statistics of China shows that production and new orders have demonstrated growth in sectors such as agriculture and sideline food processing, general equipment manufacturing, food and beverages.
China’s non-manufacturing PMI, which measures activity in the services and construction industries, increased in December, reaching 52.2. In November, the corresponding figure was 50.
Out of the 21 industries surveyed, 17 logged higher activity than the month before, including sectors such as aviation, transportation, and telecommunications. The construction industry has also resumed growth. This dynamic was greatly facilitated by the upcoming Spring Festival holidays.
Tommy Xie, head of Asia macro research at OCBC, suggests that one of the reasons last month when there was a big swing in the non-manufacturing PMI, was partly because the construction PMI declined a lot.
Investors will also pay close attention to the Caixin/S&P Global manufacturing purchasing manager’s index, which will be published at the end of the current week.
Larry Hu, Macquarie Group’s chief China economist, said that for the Asian country’s economic system, 2024 will be remembered as the year of muddle-through. The expert also noted that deflationary pressure remains, as policy incentives are sufficient to achieve the gross domestic product (GDP) target, but not enough to reflate the Chinese economy.
It is worth noting that China’s economic system has shown some recovery after several stimulus measures imposed by Beijing in September. Tommy Xie stated that the overall recovery is continuing.
It is worth mentioning that China’s economic growth target for 2024, which was set by the authorities of the Asian country, is about 5%. The media has also repeatedly published information according to which the mentioned target is likely to be retained in 2025, but a final decision on this issue has not yet been made.
Last week, the World Bank revised up its forecast for China’s economic growth in 2024. Experts of this financial institution expect that the increase in the GDP of the Asian country for the mentioned period will amount to 4.9%. The previous version of the World Bank’s forecast envisaged 4.8% growth in the Chinese economy in 2024.
Some recent data indicate that the Asian country’s economic system continues to be in deflation condition. The corresponding state of affairs is mainly due to the impact of circumstances such as the prolonged downturn in the Chinese real estate market and weak consumer demand.
In November, China’s consumer inflation fell to the lowest level in the last five months. The Asian country’s export and import figures fell short of expectations.
China’s industrial profits declined in November. In this case, the downward dynamic is observed for the fourth month in a row.
Last week, the Chinese finance ministry announced its intention to increase fiscal support in 2025 to boost consumption by expanding consumer goods trade-ins and raising pensions and medical insurance subsidies for residents.
The Asian country’s authorities also plan to issue special treasury bonds worth 3 trillion yuan ($411 billion) in 2025. This intention is aimed at strengthening fiscal incentive efforts.
As we have reported earlier, Xi Jinping Says China’s 2024 GDP Growth Set to Hit Target.
