BEIJING, Jan 4 (Reuters) – Activity in China’s manufacturing sector rose in December as the world’s second-largest economy maintained its recovery to pre-pandemic levels, according to a business survey do on Monday, although rising cost pressures slowed the pace of expansion.
Caixin / Markit’s Manufacturing Purchasing Managers’ Index (PMI) fell to 53.0 from 54.9 in November, with an indicator that remains well above the 50 level that separates growth from contraction , but loses expectations and slows to a slower pace in three months.
Analysts polled by Reuters had predicted that the headline reading would drop to 54.8.
China’s vast industrial sector has achieved an impressive recovery from the coronavirus shock thanks to surprisingly strong exports. The economy is expected to expand by around 2% throughout 2020, the weakest pace in the last three decades, but much stronger than the other major economies still struggling to contain infections.
However, more severe coronavirus control measures in many of its key trading partners in the west could affect industrial demand, weighing on the recovery.
The Caixin PMI reading comes after an official indicator of factory activity, which focuses more on larger, state-owned companies, also moderate, but still strong.
“The negative impact of the pandemic on the national economy decreased further and the manufacturing industry continued to recover. Both parts of supply and demand continued to improve. Demand abroad also rose steadily, ”Wang Zhe, a senior economist at Caixin Insight Group, wrote in a note accompanying the survey statement.
The private sector survey also showed that ticket prices rose sharply, at the fastest pace since 2017, with more expensive commodities, especially metals, to blame for the rise. Chinese factories also laid off more workers than they first hired in four months, though the decline was modest.
“We need to pay attention to the growing pressure on costs caused by rising commodity prices and their adverse impact on employment, which is particularly important for the design of the output of stimulus policies implemented during the epidemic, ”Wang said.
Indicators of total orders and factory production fell from November, but remained strong. Growth in new export orders also slowed.
“We expect the economic recovery in the post-epidemic era to continue for several months and macroeconomic indicators will be stronger in the next six months, given the low bases in the first half of 2020,” Wang said. (Report by Gabriel Crossley; Edited by Sam Holmes)